Most of you probably know what this past week was like in market land. Enormous swings up and down. The NASDAQ losing 2K points from its high just 14 sessions ago. Entire indexes giving up all their 2021 gains.
Shortly after the open on Friday, things went south again. The NASDAQ peeled off another 350 points, the DOW plunged red by another 200+ the S&P was blood red by 40. It was another slaughter day. Until….
Most of you probably know what this past week was like in market land. Enormous swings up and down. The NASDAQ losing 2K points from its high just 14 sessions ago. Entire indexes giving up all their 2021 gains.
Shortly after the open on Friday, things went south again. The NASDAQ peeled off another 350 points, the DOW plunged red by another 200+ the S&P was blood red by 40. It was another slaughter day. Until….
(Reuters) - The recent run up in yields on longer-dated U.S. Treasury securities reflects improving expectations for the U.S. economy, St. Louis Federal Reserve President James Bullard said on Friday, adding that he is not eyeing a specific level of yields that might concern him.
The 10-year U.S. Treasury note yield - which rose above 1.61% on Friday - is just returning to the level consistent with the six months before the pandemic, he said, characterizing it as “still quite low level of yields.”
Echoing Fed Chair Jerome Powell’s comments from a day earlier, Bullard said he would be concerned by disorderly behavior in the Treasury market. “Something panicky would catch my attention, but we’re not at that point.”
But he wasn’t done. In what would serve as the catalyst to reverse all that blood red on the indexes, he had a lot to say. Let’s look at some of it:
BULLARD: COMMODITY PRICE JUMP DOESN'T EQUAL SUSTAINED INFLATION
BULLARD: LOOKS LIKE WE'RE GOING TO HAVE ROBUST ECONOMY IN 2021
BULLARD: WOULD BE CONCERNED BY DISORDERLY TRADING
BULLARD: WE'RE NOT AT THAT POINT
So let’s just chat about what this idiot just said, especially the one about commodity price jumping doesn’t equal sustained inflation. Pardon my language here folks but… bullshit.
It’s truly mind boggling when on the VERY SAME DAY that CNBC ran a 15 minute segment concerning rising car prices, Bullard comes out with his BS.
The story goes, that because of the rise in the price of steel, copper, aluminum, etc, the cost to produce a vehicle has increased by over 1,000 dollars. So, to make up for that, new car prices have hit an all time high. The amount needed to finance these new cars has hit an all time high.
I don’t much like getting lied to, neither do you. But in market land and with our central bankers, we get lied to daily. Powell was just on two days ago saying that he still needs to see more inflation, they always say they need more and it’s still well below their 2% target.
More lies. Every one of you knows that the cost for real, tangible, 3 dimensional products is rising. You know your fuel, is soaring. Groceries soaring, insurance soaring. The Chapwood index comparing prices in 50 American cities, for 500 commonly purchased goods, show between 8 and 12% annual gains over the past 5 years.
Yet the Chair of the Federal Reserve will look you in the eye and tell you we’re short of his 2% target. Then this idiot Bullard will tell you that copper hitting an all time high, and steel rates soaring, won’t have any long term effects on inflation.
This is from the USDA, you know, the food folks at Uncle Sam:
The food-away-from-home (restaurant purchases) CPI increased 0.3 percent in January 2021 and was 3.9 percent higher than January 2020; and
The food-at-home (grocery store or supermarket food purchases) CPI increased 0.3 percent from December 2020 to January 2021 and was 3.7 percent higher than January 2020.
Oh that’s right, the Fed’s don’t count such frivolous stuff as food. ( Or housing, or damn near anything) But I digress….
So… it did work however. Having Bullard come on and Bloviate prescripted lies, stopped the market from falling and instead gave them a reason to put in a “Vee” style reversal. By 1:30 pm, the DOW wasn’t down 200 it was up 350. The NASDAQ wasn’t down 300+ it was up 100. The S&P? From down 45 to green by 48.
Bullard had done his job. The market was a hot mess after Powell disappointed them by not announcing anything about “yield curve control” measures, and the ten year had snapped higher. So they sent the Bullard out to calm the masses, to right the ship.
However it begs the question, was Friday a one day wonder, or was some form of short term bottom actually put in place? One could argue that the things that made the NASDAQ puke for two weeks, and the other indexes to roll over blood red, have not changed. The only thing that changed was being spoon fed Bullard BS.
Yet in market land, sweet nothings and lies often do their job well enough to make stock prices move higher. This could be another example of that, and we do start moving higher again. Sitting there Friday and watching the volume, and the broad base of stocks that rebounded, it seemed pretty solid.
That said, I’d be cautious. It was 2 Sunday’s ago that I wrote that I thought we were coming into a period of incredible volatility and that caution was warranted. Well, I got that one right. We’ve had a correction. Now we need confirmation that what we witnessed Friday wasn’t a dead cat bounce. Often times DCB’s are pretty violent to the upside, only to peter out in a day or two and the index rolls lower and lower.
If the ten year settles down, and we’re looking green again on Monday, we might then be able to think that for now…the selling is over and you can take some positions. Good luck out there, it’s been a very tough environment over the past two weeks and we might not be out of the woods.