8/28/2015
By Charles Payne, CEO & Principal Analyst

China is up. The Shanghai Composite index rose by about 149 points or 4.8% overnight. However, the US stock market began the session perhaps thinking too much ahead of the weekend. This week is one for the record books and will be studied for years. It’s too early to know the lessons, although staying the course should be the main lesson. One thing people will try to figure out is who the villains were and who were the heroes.

Heroes

• Individual Investors- they didn’t panic and, in fact, most were looking to buy the crater.
• Economic Data- lost in the haze of the panic, virtually all the releases this week came in better than expected, including the GDP revision yesterday.
• China- came through with several attempts to stop the bleeding…American investors seem okay with the suggestion of jailing any sellers.

Villains

• China- the house of cards is imploding and for some reason we’re angry.
• Machines- the algorithms went nuts…but there’s an old saying, ‘don’t hate the robot, hate the programmer.’

Then there’s the Federal Reserve which some say came to the rescue via comments from William Dudley of the New York Fed. I’m not buying that for a few reasons. First, he’s a dove: his comments weren’t surprising or new. Second, he still left the door slightly ajar for a rate hike next month.

Hearing the Fed

Dream if you can a courtyard
An ocean of violets in bloom
Animals strike curious poses
They feel the heat
The heat between me and you

- When Doves Cry by Prince

The Yellen Federal Reserve is as dovish as they come, which means further accommodation isn’t out of the question, but that also means a greater chance of staying too low for too long (see Alan Greenspan).

On that note, the previous Fed had three hawks with greater talons than any on the current configuration.  So when you hear Richard Fisher, Charles Plosser and Loretta Mester on television sounding like the end is near, understand they are hawks.

By the same token, here’s the breakdown of current members.

I don’t think there will be a rate hike in September, maybe December, but it still a stretch in my mind.  The economy needs to get on track and we can’t be sitting around celebrating 3.7% growth- need 5% or better.

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Charles Payne
Wall Street Strategies

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