And the Chorus of Clowns Continues - Market Churns

Stocks rallied, Oil trades near $50/barrel, Gold breaches intermediate support and is now testing long term support at $1265/oz, the Dollar continues to outperform and pierces long-term resistance at $95.91 and now looks ready to test the July highs of $97.55 as the mkt tries to prepare herself for that imminent rate rise that is coming in December.....or at least that is what the chorus of clowns (read members of the FED) are once again pontificating on......Listen - its time - this game of cat and mouse is about to come to an end....this week - we have heard nothing but why it is necessary for the FED to initiate a path to the normalization of rates in December......And yesterday was no different...

I guess the question really is - what was the difference between the September expectation and the December expectation other than 3 more months?  Oh yeah - the election! I forgot!   I mean is the data really going to be significantly different?   If we are ready in December then I am pretty sure we were ready in September - which begs the question - Has the FED been acting in an independent way?  Why would the FED have raised rates prior to the election and risk a mkt beating?  Well, clearly they chose not to...but in December - the votes will have been cast and they don't have to worry any longer about being accused of any political bent.....

Richmond's Jeffrey Lacker - a NON VOTING member of the FED came out swinging yesterday while giving a speech at Marshall University in Huntington, WV,  saying that -

"There are signs that inflation is heating up"  (Brilliant, I say!)

Never mind that the CPI has been woefully below the policy target of 2% for more than 4 yrs....but the argument is that the unemployment rate of 4.9% is low enough that it 'could'put upward pressure on wages, 'which could'  lead to faster price gains.....Hasn't that been the argument for the last 8 yrs?  Once we reach 'full employment' then wages will have nowhere to go but UP and when they do - we can expect inflation to catch on fire......but alas - that isn't happening yet....

So in his opinion that makes a strong case for the FED to raise rates more quickly than previously discussed.....(It's a good thing this guy is a Non-Voting member - because he clearly did not listen to Janet 3 weeks ago when she announced that the FED had modified (downward) the pace of its future plans of rate increases thru 2018. )  Does he realize that we are still growing at less than 2% a yr, did he hear that the IMF cut the their estimate of US growth in 2016 to 1.6% DOWN from 2.6%?  Does he realize that the Atlanta FED GDPNow forecast for the 3rd qtr was also cut to 2.2% DOWN from 2.7% - never mind that we only grew at 1% for the 1H of 2016? 

Does he realize that a stronger dollar will be good for the US consumer (not so good for the multinationals but that's another part of the story).  I mean things like imported goods - fancy Italian shoes and handbags, sweet Belgian chocolate and French wines & imported cars will all be cheaper for Americans.  And while a strong dollar may hurt the large multinationals - US centric small/midsize companies will benefit.  And a stronger dollar will attract overseas money into the stock mkt as those investors hunt for yield in dollar-denominated returns.   And if you are a traveler - then pack your bags!  A stronger dollar will give you more bang for your buck across the pond!   Hey!  Maybe the sun is shining!!! 

Ok - back to the mkt...... stocks rebounded and remains in a tug-a-war heading into tomorrow's job’s report and continues to trade in a mostly sideways trend, up one day and down the next - as we bounce between 2150/2170....... This kind of action is called 'treading water' as we wait for a catalyst and frankly, there are a couple of catalysts on the horizon...

The election, the troubles with Syria and Russia, FED action, OPEC and the coming weak earnings season, which is due to start on Tuesday.... Is there really an appetite to take on more risk at 25 x earnings going into this earnings season while we contemplate a possible rate rise in 75 days?   Even if we get those 'better than expected' earnings - the bottom line is earnings aren’t growing and that makes it hard to justify bidding up stock prices when rates are about to rise.....but hey.....Let's see what happens.....The mkt is a funny thing....sometimes good news is bad and sometimes bad news is just what the dr. ordered....

It has been difficult for the mkt to mount any real long lasting advance and this means that institutional asset managers are playing it cautious....not sure who the next president will be, not sure about the path of FED policy, not sure about the hot bed in Syria and the pending geopolitical risks, not sure about future corporate guidance and not sure about OPEC policy.........Look - the McClellan Oscillator and Summation Index has been declining for months and this suggests that mkt breadth is deteriorating, showing no sign of broad price supports...

Oil is off a bit but has had a bit of a run in the past week.....on the back of that OPEC understanding, but is the rally about to fade?  Will this OPEC deal hold?  Will Nigeria, Iran, Libya cheat?  Will US shale producers come back online with a vengeance at $50/barrel?  Will the world be beholden to the Saudis' forever?

European stocks are under a bit of pressure - nothing to write home about - German Manf Orders rose 1% vs the exp of -0.2% so that is good.....Citibank upgrades the European banks - in a bold contrarian move.....but if DB comes to a settlement or the rumors prove true that they are about to be rescued then I think the European banks soar......thoughts?  FTSE - 0.21%, CAC4 0 - 0.38%, DAX - 0.35%, EUROSTOXX - 0.31%, SPAIN -0.35% and ITALY -0.42%.

US futures are DOWN 5 pts in early trading - (bond yields are up).....and as for today - the eco data is insignificant, really....the focus is on tomorrow's NFP (Non-Farm Payroll) report...exp of +175k  - which is right in line for this year's avg of +180k/month.  I am not expecting any surprises - but I am expecting the FED to come out and say that this number remains consistent with their policy....(read - a December rate rise of 25 bps).  Once we start getting company guidance then look for the mkt to re-assess and possibly re-price stocks.  Look for the mkt to continue to tread water.....2150/2160 ish.

I was asked yesterday by a friend if I thought the S&P would pierce 2200 this year....my guess is that IF Hillary wins - then we get a 'relief rally ' that will test that nice round number...if Trump wins - then we may get another  'BREXIT' moment and see the mkt back off swiftly and possibly violently (think surprise)....but the odds of that happening - I think are about 30%.  Now as we move thru October and the polls start to predict - the mkt will react ahead of the actual event - so sit tight - this is not the time to go on vacation....
 

Take Good Care
KP

Sherry Braised Chicken Thighs/Legs

This is a great dish and easy to make. – Great for a large crowd.
 
For this you need:  a cast iron pot or oven proof frying pan – along with a cut up chicken - legs, thighs, breasts. S&P, fresh peeled garlic – crushed and chopped,  1 c of Dry Sherry,  Red Pepper Flakes, Fresh Lemon Juice, ¼ lb of Chorizo – cut into pieces, Olive oil, 2 Medium Red Onions – peeled and sliced, Red & Green Bell Peppers – cored and seeded and cut into strips, Chicken Stock, Plum Tomatoes cut in half and 3 large Potatoes – cut in half and then cut in half again.
 
The night before you want to make this dish – rinse and pat dry the chicken pieces.  Place in a large pan – season with S&P.  In a large bowl – mix the garlic, sherry, lemon juice, and red pepper flakes. Pour this over the chicken – mix well  to coat all of the pieces  - cover and place in the fridge overnight.
 
Next day – remove from the fridge and allow to come up to room temp.
 
Preheat oven to 325 degrees.
 
In a large cast iron pot or frying pan – Add in a splash of olive oil and fry the chorizo until it is browned up.  Maybe 5 mins.  Remove the chorizo* with a slotted spoon and set aside on a plate.  Do not remove the rendering.  Turn the heat to high and sear the chicken pieces until nice and brown on all sides – should be 10 mins or so.  Remove pieces and set aside on a plate.  Do not remove the rendering.
 
Now – add the sliced onions and bell peppers and sauté until soft – maybe 8 mins or so….Next pour the leftover marinade in the pan and continue cooking for another 5 mins.  Now add back the chicken and chorizo.  Add in the plum tomatoes, potatoes and chicken stock – bring to a boil.  Taste the sauce and adjust seasoning if necessary.  Cover and place in the oven (directly in that oven proof pot).  This should now braise for about 40 more mins.  Serve this with a large mixed green salad.

 
Buon Appetito.