Don't let the sun go down on me
Although I search myself, it's always someone else I see
I'd just allow a fragment of your life to wander free
But losing everything is like the sun going down on me

-Elton John

Today, we will find out if Scotland has chosen freedom, or if England can continue to hold on after a 307- year-old union; the country that rightfully boasts ‘the sun never sets on the British Empire.’ However, that was then, this is now.  Nevertheless, scores of nations have declared independence from England over the years, but this would be a crushing blow.  Not sure of the impact on our market, but it could cause some uncertainty.

Yellen in no Rush

The Fed spoke yesterday. They did not change their language which was what many market-watchers were expecting, so the result was a sigh of relief, though not before the market tumbled a bit. It was a curious reaction, even the muted close did not point to overwhelming excitement that the Fed would stick around longer. In addition to Fed news, some of the oldest blue chips around powered the major indices. US Steel is taking strategic actions and the stock soared, while DuPont is under pressure from an activist investor, and homebuilders popped on a strong earnings report from Lennar.

The Fed and the stock market might think this is the perfect ‘Goldilocks’ period of tepid growth, low inflation, and higher asset prices. However, the Fed is not going to raise rates because the numbers we have now, including the employment picture, would be admitting it is an ineffective organization. As it stands now, it is hard to see how the Fed take itself seriously, or expects others to take it seriously as well. The last hope is for people to stop saving and to start spending, which might actually be happening, even if this uneven recovery leaves a lot to be desired. The thing is that the stock market is not a direct reflection of America anymore, especially as the nation looks more and more like the new story of ‘Goldilocks.’

• Big and great for some
• Just right or okay for others
• Too little for many more

 Our Gross Domestic Product (GDP) continues to climb higher, but it has not translated into household wealth for a long time.

In fact, since 2000, there has been an explosion for Americans living in poverty: over 30 million to more than 45 million. While the poverty rate dipped to 14.5% from 15% last year, the total amount was the same; the overall population simply grew.

Of course, nobody feels more maligned than the middle-class, as household income climbed $180 last year. Interestingly, foreigners had a good year in 2013, especially people who are not citizens – their incomes surged by 6.0%, up from 2012.

Household

Households	$51,939	+180
Married	$76,794	-$285
Single Female	$35,154	+$658
Single Male	$50,625	+$1,284

Nativity

Native	$52,779	+0.4%
Foreign Born	$46,935	+1.7%
Naturalized	$54,974	+2.2%
Not Citizens	$40,578	+6.0%

The American industry has been rewarded for being nimble with the explosion of wealth around the world. For me, there are no doubt that policies, including high taxes and regulations stalled household wealth increases, but I think the dynamics of opportunity have changed, since that knowledge-based economy we keep saying is coming is already here. Moreover, I am hoping midterm elections go a long way toward turning the tide, although there needs to be an executive in the White House who understands that ‘you can’t attempt to harm one segment of the population at the expense of others.’ Especially, when the segment under siege is the one that has the ability to create jobs, and a shared prosperity, when not rigged by an angry government trying to call the shots.

Today’s Session

I saw a headline this morning "dollar at six year high on dovish Yellen" and I'm saying to myself, “That does not make sense.” The textbooks say the Fed prints money, the dollar loses value, our goods and services are cheaper around the world and it helps the American exports. The textbook also says that debasing the dollar is great for hard assets, especially gold, but that was only true in the beginning for the Fed's extraordinary action.

• QE I Nov 2008
• QE 2 Nov 2010
• QE 3 Sept 2012

However, gold has been crushed. The sell-off began not long after the announcement of the second round of quantitative easing and continues to look awful on the charts. Moreover, oil is down dramatically, even with the "world on fire" and global demand.

The only part of the Fed that might be living up to the textbook is the virtuous cycle. The virtuous cycle has only just began showing signs, but I think banks will begin to make loans easier for Main Street and green shoots beyond major money centers and big cities could beget more enthusiasm. I'm not talking runaway mania, but more people starting businesses and buying homes.

The Fed will raise rates next year, and the market knows this. The rally will now have to be based more than ever on greater evidence that the economy is ready to roll without training wheels.

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