Global Mkts Explode to the Upside

***US STOCK FUTURES are exploding to the upside - all indexes showing early strength as the sun rises over NYC........S&P futures surging another 22 pts (+1%) in early pre-mkt trading - looking to take the S&P to brand new all time highs if the strength holds into the opening bell - Global mkts also surging overnight and this morning....the BoJ (Bank of Japan) surprises the world by CUTTING rates expanding it monetary base target to 80 trillion yen as they continue to support an economy hit hard by the sales tax hike in April. In addition – Reuters is reporting that a Japanese gov’t panel has approved plans to allow the GPIF (Gov’t Pension Inv Fund) to raise their allocation of stocks to 25% - up from the current 12% weighting - sending the Nikkei surging by 5%.....as investors now celebrate the "new" demand for stocks created by this move....Hong Kong +1.25%, China +1.2% and ASX +0.92%.

In Europe - mkts are racing higher - joining the party that is taking place around the world....I mean with all of the fireworks going off - you would think it was New Year's Eve! Eurozone inflation (CPI) ticked higher in October giving some relief to the efforts of the ECB - although the annual rate remains below target - it is at least moving in the right direction..... The +0.4% read met expectations and is a bit higher over September....comments by ECB council member - Ewald Nowotny - Gov of the Austrian National Bank - telling CNBC that 'the biggest challenge Europe faces right now is low growth and that both monetary and fiscal policy initiatives are needed to tackle this problem'....FTSE +1%, CAC 40 + 1.8%, DAX +1.7%, EUROSTOXX +2%, SPAIN +1.74% AND ITALY +1.7%

And to think - 10 days ago - analysts/strategists were predicting the BIG ONE as the call for a long overdue correction was knocking on the door......

What just happened? The FED kills off QE and global mkts move higher? Could investors/traders be celebrating the end of QE? Could this time really be different?
Stocks soared yesterday as companies continue to report strong earnings and the commerce dept told us that 3rd qtr US GDP blew the roof off the house growing faster than expected - . The US economy grew at a 3.5% rate vs. expectations of 3%. The reaction of the mkts is telling you that today – ‘good news is indeed good news’…..the idea that investors are worried about the FED removing stimulus apparently went out the window as they remain convinced that rates in this country will remain low for a while. So what gives? Such a strong GDP report would clearly give cover for the FED in terms of being able to raise rates – or does it?

At first glance - the GDP read was a very solid beat, but pull back the covers and look under the sheets and you can see that ‘it’s not always what it appears to be’…..there are actually a few reasons why the Fed could remain cautious….

Yesterday’s report means that the US economy has just put in the strongest 6th month period since 2003 (2nd Qtr GDP at 4.6% and now 3rd Qtr GDP at 3.5%). Helping this along was the surge in defense spending (+16%), and a narrowing of the trade gap – fair enough……..However business expenditures, housing and CONSUMER spending actually slowed.

Consumer spending slowed to 1.8% down from the 2.5% rate in the 2nd qtr. And since the consumer accounts for more than 75% of the US economy this is a bit of concern…in fact it runs counter to the ‘strong’ consumer confidence report we saw last week. Slowing consumer spending causes businesses to remain cautious resulting in slowing business confidence. Weakness here is exactly why inflation remains constrained allowing the FED to keep rates low……

And low rates will continue to help the housing mkt – a key part of the economic recovery – so it’s a ‘win win’ for everyone.
The other reason GDP came in so strong was a narrowing of the trade gap, which added 1.32% to the number. But since the end of the 3rd qtr we have seen the US dollar get stronger and a strong dollar could see this situation reverse itself as exports become more expensive, and imports become cheaper – resulting in a wider trade gap as we move into the 4th qtr. This is just another reason why the Fed, like many other central banks, doesn’t want a strong currency, and an underlying motive why they remain ambiguous about rate increases.

The fact that the FED is concerned about sustained strength in the dollar will continue to provide some comfort for the mkts…..and the fact that other central banks are concerned about strength in their currencies will continue to provide strength in those mkts. Seems like we are headed for an all out currency war again……
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Speaking of currencies - Is the divergence between the dollar and the mkts sending a warning flag? Are investors just choosing to ignore it? The dollar was strong again yesterday and up for the week. Typically when the dollar moves higher, equities and commodities come under pressure. But the mkt seems to be shrugging off the recent spike in the dollar – causing a possible divergence warning. Either the dollar will pull back as equities and commodities move higher or equities and commodities will correct as the dollar moves higher – correct does not mean crash – it just means a bit of a rebalance.

We are at month end - so the usual 'window dressing' is in full force and don't discount the importance of the mid-terms elections as the Democrats fight to retain control of the Senate.... The NY Post runs with the headline -

"Democrats Threaten Public Shaming to Get Voters to the Polls"

The New York State Democratic Committee is bullying people into voting next week with intimidating letters warning that it can easily find out which slackers fail to cast a ballot next Tuesday.

“Who you vote for is your secret. But whether or not you vote is public record,” the letter says. We will be reviewing voting records . . . to determine whether you joined your neighbors who voted in 2014.”

It ends with a line better suited to a mob movie than a major political party:

“If you do not vote this year, we will be interested to hear why not.”

Brooklyn and Manhattan residents who received the note Wednesday were furious, calling it an attempt to browbeat them into showing up at the polls.

“I’m outraged. Whether I vote or not is none of your business!” said a Manhattan voter, who was so incensed that she complained to a local Democratic leader.

“The letter is ludicrous and menacing,” said the voter, who requested anonymity.

The woman also received a report card of her voting record, pointing out that she had failed to vote in two of the last four elections.

Overall, the notices were sent out to 1 million registered Democrats who had failed to vote in previous midterm elections, according to the group

Fusilli w/Sweet Red, Green and Yellow Peppers

This is a great dish - hails from Northern Italy - pleasing to the eye and tantalizing to the taste buds...the herbal green pepper complements the sweeter red and the mellow yellow....Read on -

You will need: butter, olive oil, onion, red, green & yellow bell peppers, s&p, heavy cream, pasta shells, chopped Italian parsley and fresh grated Parmegiana-Reggiano cheese....

This is a simple dish that you will not easily forget -

In a large sauté pan on med heat - add 1/2 stick of butter a bit of olive oil (so butter does not burn) and chopped onion - cook until the onion becomes soft and translucent. Next add diced peppers - should be about 3 cups total (so figure it out....1 cup of each) - turn heat to med high and sauté these until tender - stirring occasionally. Season with s&p.

Slowly add the cream....should be about 3/4 cup/1 cup....cook until you have reduced by half.....You need to stand there and stir it...do not leave it unattended. When done turn off.
In a separate pot of salted boiling water -add the Fusilli and cook for about 7 / 8 mins or until aldente. Reserve one mugful of pasta water then drain and return to pot....add back enough pasta water to moisten only.....- do not soak. Toss the pasta (you will see the water gets absorbed).

Now add the cream and pepper sauce, a bit of parsley for a rich green accent and fresh grated Parmegiana-Reggiano cheese. Toss and serve immediately in a warmed bowl. Always have extra cheese on the table for your guests. Choose your favorite white wine to complement.

**here is an added benefit....if you make more sauce than you need - refrigerate and use the following day on chicken, veal or even pork cutlets. Season the cutlet with s&p - then sauté the meat in a pan with butter and olive oil - right before it is done - add back the cream & pepper sauce from the previous night and let cook for a couple more mins....Serve with a large mixed green salad and dressing of your choice.

Buon Appetito -