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Morning Commentary

DECLARING INDEPENDENCE BY DECLARING WAR?

By Charles Payne, CEO & Principal Analyst
8/28/2019 9:00 AM

Image result for neroMove Over, Nero

I’ve gone from thinking there is no way the Federal Reserve would allow Trump’s tweets and criticism to affect the monetary policy. Then came the question and answer period after the last Federal Open Market Committee (FOMC) gathering. I’m not so sure Jay Powell & Company aren’t letting emotions overrule guidelines and stated goals.

Making this conundrum even more complicated is the Bloomberg op-ed written by former NY Fed President William Dudley.

He is asking his former colleagues not to make any monetary policy moves that would aid President Trump in the trade war with China. He makes the case that it’s not in the “realm” of the Federal Reserve, which is supposed to only focus on stable prices and maximum employment.   He considers the trade fight to be like government spending.

Dudley calls the fight a “manufactured disaster-in-the-making,” saying it keeps undermining business and consumer confidence. Yet, on the same day, we got the August Consumer Confidence report, which saw the highest present conditions level since November 2000. And the day after, we learned via the Durable Goods report that business investments had grown three consecutive months into July.

Be that as it may, Dudley thinks the Fed should let a worst-case outcome happen because that would absolve them of any blame. The same Fed that pumped four trillion dollars into the economy and established countless additional measures to bail out banks and certain businesses should be above the political fray.

If Dudley is right about a potential disaster, he is suggesting the Fed ignore prices and employment and just watch it all burn to the ground to prove they are independent. This wouldn’t be staying above the political fray - it would be playing the violin.

It’s also a de facto acknowledgment of what most folks already knew. The Fed is here to support big banks and big businesses during times of crisis, even if they are the authors of their misfortunes.

However, Dudley says the Fed should break out the violins and fiddles as Main Street starts to go broke.   How do we know this kind of thinking isn’t already guiding the Fed?  I hope it’s not, or all would be lost.

Message of Market

Yesterday, the market staged a late rally that was doomed, as the underlying market breadth was a wreck. There were a lot of curious actions during the session. 

Energy was the biggest losing sector even as West Texas Intermediate (WTI) rallied $2.05 to $55.69 a barrel. Refiners were the biggest drag.

Financials continue to be a disaster this time; Unum Group (UNM) and other life insurers anchored the sector.

Health Care swayed on news Elizabeth Warren and Bernie Sanders have propelled to the top of the Democratic polls, according to Monmouth University. Back in April, Bernie Sanders unveiled his Medicare for all plan in the Senate, sending health insurance stocks lower, especially those in the managed care index. Humana (HUM) was hammered yesterday, tumbling below its 200-day moving average just a month after a strong earnings report and stronger guidance had Wall Street and financial media touting the stock.

Although Consumer Staples finished slightly lower, the stock of the day was Costco (COST), which saw its debut in China create a frenzy of shoppers eager for the big-box experience. 

Social media and video game makers continue to hint at major breakouts, helping the Communication Services sector finish in the green.

S&P 500 Index

 

-0.32%

Communication Services (XLC)

+0.19%

 

Consumer Discretionary (XLY)

 

-0.49%

Consumer Staples (XLP)

 

-0.28%

Energy (XLE)

 

-0.62%

Financials (XLF)

 

-0.61%

Health Care (XLV)

 

-0.59%

Industrials (XLI)

 

-0.52%

Materials (XLB)

+0.07%

 

Real Estate (XLRE)

 

-0.33%

Technology (XLK)

 

-0.15%

Utilities (XLU)

+0.18%

 

 

With all the data out this week, including the FHFA Price Index +0.2%, I’m beginning to wonder if the U.S. economy is picking up steam. That would be something - meanwhile, the Atlanta Fed is at a 2.3 Gross Domestic Product (GDP) estimate for the quarter.

Approach

There is a serious shift into medical instruments and diagnostic equipment, and we took a position in the model portfolio. All subscribers should have adequate cash levels for new ideas.

Communication Services

Consumer Discretionary

Consumer Staples

1

2

1

Energy

Financials

Healthcare

1

1

3

Industrial

Materials

Real Estate

3

2

1

Technology

Utilities

Cash

2

0

3

Today’s Session

There is more pressure on the market from lingering questions on the deepening yield curve between the two- and ten-year treasuries and yuan to the dollar.   But the main driver of the phenomenon is negative global yields.

Global Yields

10- Year

United States

1.466

Germany

-0.713

Japan

-0.28

Switzerland

-1.05

Sweden

-0.37

United Kingdom

0.47

 

 


Comments
You're Starting to catch on everyone wants to crush Trump Needs to get rid of Fed u have said yourself they have caused most reccesions u wake up market dn 100 or 200 points Algorithms in control not earnings then everyone comes up with bullshit excuse why dn. as if they had a crystal ball media talking us into recesion polls lie to us every day economy booming SEC must be trump haters to there letting algorithms destroy retail investor destroy people to destroy Trump He's our only Hope of defeating them

garry brewer on 8/28/2019 10:22:43 AM
We either fix the trade agreements that are not in our best interests, NOW... or eventually fail as a Country. We MUST stand up and take the pain, or there will be NO gain Socialism will not fix anything.

Barry M. Gold on 8/28/2019 11:43:19 AM
I agree 100% Barry and disagree with the notion China is some unstoppable foe really to buckle down and ride this out...in Gucci loafers. Xi can reference Mao and the long march but the nation has massive debt issues, currency flight, slowing economy and high expectations. CP

Charles Payne on 8/28/2019 1:10:23 PM
England (UK) is positive 0.47 ---let's do more business with them --God Save the Queen--- Brexit.

john on 8/28/2019 12:06:23 PM
The Fed is in cahoots with the Democratic Party to steal the 2020 election from Trump.

William Brown on 8/28/2019 12:56:00 PM
Hello Charles - Great article. You were kind enough to reference my book, many moons ago, CHINA HOUSE, in which I pointed out these approaching issues regarding China - back in 2005. I was somewhat ahead of my time, but China continues to be a wavering Paper Tiger, that is based on lies, deceit, corruption and total tyranny, and will go to any extreme to keep the Communist Party afloat. President Trump has finally figured out what China is all about - and if America does not wake up soon, it will find itself backed into a corner with regard to that nation. Trump should exert EXTREME pressure on that country, and bring the Chinese Government to its knees. As evidenced in Hong Kong, the Chinese people HATE the Communist from of government - and are only looking for someone to lead them out of the wilderness. I hope President Trump has the wherewithal to help the Chinese people accomplish that goal. From my personal experience, living in China for one year, I learned how much the people actually DESPISE the Communist regime - to the utter core. The old adage comes into play here: Strike While the Iron is HOT.

Lawrence Klepinger on 8/28/2019 2:21:52 PM
[ And with this, may I once again raise a toast to Mirthful Irreverence Everywhere. ]
The FED is being killed of, Nice and Slowly… the better to enjoy the brilliant satisfaction of THAT torture sport… ||| “He [former NY Fed President William Dudley] is asking his former colleagues not to make any monetary policy moves that would aid President Trump in the trade war with China. He makes the case that it’s not in the “realm” of the Federal Reserve, which is supposed to only focus on stable prices and maximum employment. He considers the trade fight to be like government spending.” = excellent sell screed to hide the military negotiation dynamic of “nuclear war first… and then we will talk”. Gosh, you are cunning. [ Some might say that if “Trump” kills off the Globalist cabal and its FED, then “he” will not be extinguished… if he fails, he will be made to regret it…] How about you? Which side do you pick? Can you count on the pay-out, whichever side you chose? If you were a black man on the boats crossing the Potomac, why would you the you of you have been there? Were you in the same color skin then as today? Do you have it in your gut to call for a public torture and execution of anything and Everything having to do with the “FED”. What is the internal disposition of your brother, who, wisely, is never ever allowed to be heard publically? [I most definitely would listen to him because he was three seconds too slow hanging up on me when we talked…. (only one time). I understand his action to be courteous, yet firm, in his assessment that I was not a “sale”, and of how to establish authority of trustworthiness’s control (that I understand and honor for it’s purpose and truthfulness… I am well experienced in the shit of phone-room protocol work. I recognized his worth on the phone and only wish I could have been an encouragement to him.]

I would prefer that the things blow up and at least 2 billion humans die as a consequence so we can, as a world, move forward to the work at hand… Sovereign, ASSET Back Currencies… but I am not allowed to have my way.
However, the market is smarter than that. The will of wisdom’s humans will make me capitulate and not permit a kill off… damn it”!” [are you smiling yet, or are you totally confused by my tirade?]

ROBERT FAY on 8/29/2019 6:59:11 AM
 

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