11/15/13

As the new Fed Chair’s comments to the Senate yesterday are digested by the market – we have initiated a Heavy SELL rating on anything Federal Reserve. Statements,  outlooks, haircuts – etcetera. While we do expect more of the same rhetoric, it continues to baffle us. Common sense, logic, truth – we search and find not. I only say this half comically because it’s becoming ridiculous for anyone with experience or logic based thinking to continue to believe in the policies of, not just our leaders, but the most powerful bank in the world.

‘Go After What Makes Sense’

With Janet Yellen declaring that she sees no bubble’s developing anywhere according to current valuation levels, David Stockman quickly countered that “we have bubbles everywhere” — in junk bonds, stocks, and a housing market “riddled with speculators.”

According to Yellen – A stock market at record highs amidst a country with the number of unemployed at over 15,000,000(conservatively), nearly 100,000,000 Americans receiving government assistance from a government that currently – without loans, is unable to pay their bills and a market with a record amount of borrowed margin debt(over 400 billion) is not in bubble territory.

In a current market driven by emotion, the old I/E dissipates. But, realistically, what is this Yellen talking about? Everything that she’s saying is ok- is not ok. Everything points to issues, everywhere… yet we’re expected to buy a cheap sales pitch? More to come….

Don’t Fight – Accept and Prepare

The market has followed up Yellen’s comments with new all time highs. The trend continues. As we’ve been preaching for weeks, the dove-ish policies of Yellen would drive the Dow to 16,000. Laugh at their reasoning and accept the path that it takes your portfolio, but don’t Fight ’em.

Gold remained flat, even with the easy money reign to continue, most likely due to the fact that Bernanke’s old comments re-surfaced about the unpredictability of it’s pricing.

Moving forward, we see the market step onto a steeper cliff but to be supported by easy money in the short and medium term as we continue to present our case on the drastic turnaround down the road.