Don't Listen to the Fed's Lullaby

Call me crazy, but I just can't see what our Federal Reserve "geniuses" are seeing that lead them to conclude that conditions here at home are ripe for a liftoff in interest rates, let alone what is happening globally. 

The Fed is softly crooning "whistle while you work -- the Snow White version" to us, when things globally are falling apart, it seems like. Take a look at the following data/events from the East just from today.

Global markets are in total disarray today as data from China and Japan today completely change the picture painted yesterday, which had led to the best one-day gain in over seven years for the Nikkei. 

The day started with news that the Reserve Bank of New Zealand had cut its benchmark interest rate by 25 basis points to 2.75% and also signaled further easing if the situation in China worsens.

In Japan, a key measure of capital spending fell for the second consecutive month, leading many pundits to conclude that the economy is nowhere close to expansion yet.  Of course, in the June quarter, the Japanese GDP actually contracted, giving credence to that postulation by the gurus. 

The Nikkei got hammered lower despite comments from Bank of Japan Governor Haruhiko Kuroda, who said that Japan would remain on the easy money path until inflation reached the 2% level, which he expected to happen around the fall of 2016.

In China, we had data out that showed that producer prices fell for the 42nd consecutive month, despite a rise in the CPI for the month of August. Chinese Premier Li said that China would achieve its economic growth targets this year and will not see a hard landing.

In Malaysia and Indonesia, the ringgit and rupiah hit 17-year lows, as currencies also get caught up in the global turmoil and selloff in emerging markets.

Standard & Poor's did not want to be left behind with all the global fun and games, so it chimed in, pulling Brazil's investment-grade rating and dealing a body blow to the country's efforts to recover from a recession.

Finally, in India, a key economic advisor to the Prime Minister's Office said that the country needs at least a full percentage cut in interest rates to further stimulate the economy.

As a result, we had the Nikkei closing lower by 2.5%, the Shanghai Composite giving back 1.4%, the Hang Seng dropping by 2.6%. The Sensex is lower by 0.9% with about an hour before its close. The KOSPI managed to close higher by 1.4%.

Across the pond, the CAC is down 83 basis points, the DAX is lower by 0.7% and the FTSE is off about 1%.

Of course, our machine-manipulated futures are implying a slightly higher open. The average investor is getting slaughtered/cheated/conned by the mindless algos and bots, while Wall Street and the SEC cheer on the sidelines and whisper in our ears how efficient our markets really are.

So think hard and think long when our Federal Reserve lulls you into whistling while you work, while the world around us is in still in easing mode as far as interest rates are concerned.

Original Link
http://realmoney.thestreet.com/articles/09/10/2015/dont-listen-feds-lullaby