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Journalism and other myths.

The Case for Raising

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17 September is the date. We find out then, at the end of the Federal Reserve Open Market Committee (FOMC) meeting, whether or not the benchmark Fed Funds Rate is raised. Nearly everyone agrees that it’s likely to happen, either in September or in December. But trillions of dollars will be riding on the moment when the press release is issued on the Fed’s website telling people what exactly is happening.

Except for one thing – we won’t know exactly what will happen because the stock and bond markets may react in odd ways that are not easily predicted. The same is true for currency traders.

What it all comes down to is whether or not the FOMC thinks it is a good time to start or not. The arguments for and against are fairly easily summarized, but to Barataria the case is strong for a rise – especially if the net medium-term effect is that consumer rates go down.

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Drama Over Yet?

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The stock market has rallied for two days, with the S&P500 back at 1987 from its low of 1869. It’s still down 6.8% from its peak of 2130, set in May, (and nearly matched just a month ago) and down 3.5% for the year. It’s almost like the crash never happened, right?

Well, no. But there is a lot of good news for the underlying economy, some of which came in this week. The really good news is still out into next year, which is essentially forever to this market. We have to get over an interest rate hike, which will definitely come this year no matter what you read elsewhere, and a lot of jitters.

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About That Rate Increase …

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The stock market ended down for a sixth day in a row, with the S&P500 at 1869. It’s right at the low from last October of 1862, meaning that we either find support here or look out below. To date, it’s off 12.2% from its 2130 peak.

The bloodletting has one thought on everyone’s mind, at least the one thing other than “When does it stop?” The question of the day is “Does this kill the Fed’s desire to raise interest rates?”

The market was betting against a rise before, and it’s more convinced than ever that a rise in the Fed Funds Rate is not coming. But there should be a rise for one very strange reason – it may actually lower interest rates and stimulate the economy. Seriously. We’re still in Bizarro Economic territory and this could be the moment we finally get out of it.

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Stock Panic?

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“This is no time to panic. There’ll be plenty of time to panic later.”
– Author unknown (but I was sure it was Groucho Marx)

The stock market took a beating today, with the S&P 500 off 2.1%. This came for a lot of reasons but mostly because of a global selloff sparked largely by the ongoing meltdown in China. The question on everyone’s mind has to be, “How bad will it get?”

The short answer is that it can only get worse from here for a lot of reasons. Very few of them matter in the long haul, but who actually believes that the stock market is paying attention to anything beyond next quarter?

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Fear Doesn’t Glitter

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“All money is a matter of belief.”
– Adam Smith

Gold is taking a solid beating these days. It’s been slipping for a while, but when China revealed that it’s reserves were less than believed it really fell – quickly slipping below $1,100 per ounce when one mysterious trader dumped everything. It’s now more than a third off its 2010 peak and nearly everyone believes that it’s doomed to slip below $1,000 per ounce by the end of the year.

What happened? Isn’t gold the ultimate money in an unstable world? The short answer is no, and this has as much to do with the rise of the US Dollar as anything. But in the end gold is not as much a form of money as it is a barometer of fear – a commodity that appears to be in much shorter supply today than it was just a few years ago.

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