Draghi Calls Them All Out!

So here is what I said yesterday......

"Today we will hear from the ECB - as Uncle Mario (Draghi) attempts to take the focus off of the FED.  Speculation is rampant  -  The ECB is already easing at full throttle - so in addition to the negative interest rates and massive QE program and corporate bond buying program previously announced - some are expecting him to announce a program to buy bank bonds and even ETF's (read stocks).  Just for a min - think about what it means if the ECB becomes a buyer of stocks.....  He could also announce an extension of the asset purchase program already in place.   Could he disappoint the mkts by not announcing enough - of course, but mkt action is telling us that the chances of that are small...... What will that be?  So at 8:30 the ECB holds a press conference and Uncle Mario will detail the latest plan.....now - expectations are high...so any perceived disappointment will cause mkts to back off....jawboning will be perceived as a disappointment - just fyi....ACTION is what investors want....stay tuned. "

In fact while the odds were small that he would disappoint - apparently in the eyes of investors/traders he did.. so I ask -  Did he really disappoint or is it just that investors/traders who have become hooked on the "Central Bank Drugs" served up for the past 8 yrs - have no interest in going to rehab?  They WANT more drugs......to feed the beast....but like so many therapists would tell you - You have to walk away, you have to let them hit rock bottom, you have to WAKE them up in order to change the behavior!   

In his 8:30 am press conference - he made it clear that the ECB did NOT discuss an extension or enhancement of the current asset purchase plan - but rather threw the obligation of support directly on the gov't's.     Nicholas Spiro - an analyst at Lauressa Advisory in London put it clearly -

"Mr. Draghi has never been more explicit in describing the limits of monetary policy, at the cost of undermining sentiment and fueling concerns about the ability of central banks to stabilize markets.  With the US Federal Reserve deliberating over the timing of its next interest rate hike and an attempt in Japan to pass the economic stimulus baton from the central bank to the gov't, the ECB feels emboldened to speak out more forcefully about the dangers of an over reliance on monetary policy...." 

What that means is that the ECB is waving the white flag......while not surrendering per say - they are screaming for help from lawmakers......and in a bold move he called out Germany - for not boosting spending efforts to support their economy..........

"Countries that have fiscal space should use it - Germany has fiscal space."

Now while this is all well and good - Uncle Mario is by no means really walking away - he continues to enable......as he said - the ECB can continue to stimulate the economy by using its current asset purchase program and defending the use of negative interest rates - saying that there have been nearly zero side effects of NIRP (Negative Interest Rate Policy).

"Transmission of our monetary policy has never worked better than it does today.  Interest rated have to stay low for the economic recovery to proceed."

And this is what allowed the mkts to not completely implode......Uncle Mario will never throw his kid out on the street.....(and nor will the FED, or the BoJ, or the RBA or the BoE.)......so mkts backed off in a knee jerk reaction.... ....and the day began..... and while stocks initially retreated - the sellers did not all run for the door at the same time....comfortable in the fact that the spigot was not completely turned off.....But this will now cause analysts/strategists to re-visit the question about US Fed policy moves in 2 weeks.  Will Janet hold congress's feet to the fire?  Will she be so bold as to call them all out?  Will she send the message that monetary policy has run its course?  Will she raise rates?  (No).

After all of this - the dollar sold off in early trading only to rally into the close - teasing resistance at 95.21......Oil surged (+4%) to close above $47/barrel - after the gov't told us that inventories fell by 14.5 mil barrels - certainly a big drop, but one that can be partially explained by Hurricane Hermine which swept thru the Gulf of Mexico - forcing oil tankers full of oil to remain off the coast - unable to dock and unload this week - but just wait till next week - once all of those tankers unload....

On a side note - did you see the NY Times yesterday?  They reported that the labor dept likely OVER REPORTED job growth during the past 12 months and revised the number lower by 150,000 jobs....showing that retail, education, professional and business services and wholesale trade sectors suffered the brunt of the downward revision.....Now to be fair this is a preliminary estimate of the annual benchmark revision process......the final benchmark revision will not come out until February 2017 - so there will be plenty of time for more 'fudging'.....I'm just sayin....

There are no eco stats today - well that's not really true - we will get Wholesale Inventories and Wholesale Trade Sales - neither of which will mean anything to trading....so like I said - there are no eco stats today....Next week is a big week and includes Import Prices Index, Retail Sales, Philly Fed Survey, PPI, Empire Manf, Industrial Prod, Cap Utilization and CPI.....

This morning European mkts are all a bit lower.....as investors there continue to digest the latest news out of the ECB....Now while yesterdays commentary was not what so many wanted to hear - it does not change the fact that the EU will continue to need support and possible further easing if the data continues to be weak.  In Italy - the banks have turned positive after weeks of taking a beating......Banca Monte dei Paschi di Siena's CEO - Fabrizio Viola - announced his departure as the bank seeks an emergency rescue plan.....while the Bank of Italy has permissioned  Banco Popolare and Banca Popolare di Milano to move forward with their merger.  FTSE -0.27%, DAX -0.39%, CAC 40 -0.37%, EUROSTOXX -0.34%, SPAIN -0.15% and ITALY -0.27%.

US futures are down 4 pts.....as the mkt awaits 3 FED speakers today...Governor Daniel Tarullo will be on CNBC at 10 am......Boston's Eric Rosengren will be speaking at a chamber of commerce breakfast in Boston - detailing his economic forecast and what that might mean for the FED and Dallas Fed Pres Kaplan will show up in a couple of places to day....first in Austin in the morning and at the Dallas Security Traders conference at night.... None of this will really affect mkt action today....

In other news - North Korea tested and launched another 'miniaturized nuclear warhead - suggesting that is all about protecting themselves against 'threats and sanctions' from hostile enemies......I say - we kick his A**......

Have a great weekend...

Chicken Scaloppini in a Marsala Cream Sauce

All this is  - is a creamy twist on the Italian favorite… add the cream to soften the flavor and create a luscious, delicious new classic….30 mins max….

For this you need:  olive oil, butter, Chicken  cutlets (pounded thin), flour, s&p, Marsala wine and some room temp heavy cream (you can use light cream or even ½ & ½)

In a large sauté pan – heat up some butter and olive oil on med high – let the butter foam and when it subsides – dredge the cutlet in seasoned flour  (s&p) and brown quickly in the pan on both sides – maybe like 2 - 3 mins per side….remove and set aside.

  Now turn the heat up to high and add some Marsala wine – like ½ - ¾ cup…. – bring to a boil and scrape the bottom of the pan….as the wine begins to boil away – add ½ cup of the cream – turn heat to med and stir until the cream is reduced and you have a semi thick sauce…..reduce heat once again to low (not simmer) and add back the chicken  – turning them to coat well.  Simmer for 5 mins for so.....

When ready – serve on a warmed platter in the center of your table.  Serve this with a green veggie – something like steamed French cut green beans or asparagus – something simple – not garlicky….steamed - then seasoned with a dab of butter and s&p.   

 
Buon Appetito.