Three of the world’s most powerful central banks have stepped up to the plate in December. And all three have swung and missed, at least if you judge their performance by the market reaction.
Market Roundup
You know about Batter #1: European Central Bank President Mario Draghi. He offered up a heap of easy money measures on Thursday, Dec. 3. But the market tanked because it judged that he didn’t go far enough.
Draghi tried to repair the damage by delivering another one of his “we’ll do whatever it takes” kind of speeches in New York the next day. That helped drive the Dow Industrials up by 369 points. But the rally completely failed shortly thereafter.
Then there was Batter #2: Federal Reserve Chairman Janet Yellen. She followed up this Wednesday’s rate hike with lots of talk about how any further increases would be gradual, and how the economy was plenty strong enough to handle it.
That paid for a rally of around 224 Dow points … but it lasted only 24 hours. The Dow plunged 253 points yesterday, completely erasing that gain, and then tumbled nearly 370 today.
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| The Japanese central bank has moved again to spur the domestic economy. Has it failed again? |
Overnight, Batter #3 took his swing. Bank of Japan President Haruhiko Kuroda announced several modifications to that country’s $657 billion-per-year QE program. They included a change in the maturity range of bonds it’ll buy, additional stock ETF purchases, and a hike in the permissible level of purchases of Japanese REITs.
That initially sent Japanese stocks higher and the yen sharply lower. But then investors grew to appreciate that the total amount of QE wasn’t actually going up, and that the stock purchases would be offset by later sales.
And let’s face it, the BOJ has been doing QE for more than a decade with little success in spurring lasting economic growth or inflation. That’s a key reason one JPMorgan Chase economist to the measures by saying, “This all simply highlights the fact that it’s not easy to push on a string.”
So what happened? Japan’s benchmark Nikkei 225 Index tanked almost 900 points from its intraday high through the close. The yen took off like a scalded cat, a typical “risk off” trading move.
This just underscores the point that central bankers are no longer all reading from the same playbook, or all pulling in the same direction. Some are easing, some are tightening, and others are throwing whatever they can against the wall to see what sticks.Â
| “Central bankers are no longer all reading from the same playbook, or all pulling in the same direction.” |
 They’re also trying to respond to every single swing in asset prices, something they never used to do. That’s increasing volatility, rather than suppressing it, and leading to some spectacular strike outs like the three I just wrote about.
My advice? Take advantage of these wild swings to maximize your profits. For your more speculative funds, use active investments that hedge against downside risk and generate profits from moves lower in vulnerable stocks. I just recommended subscribers to my Interest Rate Speculator take two more rounds of profits today, in fact.
For your core capital, keep a higher percentage of your funds in cash and invest in less economically sensitive stocks with lower volatility and decent yields. That should help insulate you against global economic weakness and the increasingly turbulent environment we find ourselves in.
So what do you think of the “batting average” of the world’s major central bankers? Are they failing at their jobs? Or are the markets going to increasingly take matters into their own hands regardless of what Draghi, Yellen, and Kuroda say or do? Are there other strategies or pointers you want to share with your fellow investors, in addition to those I offered today? Use the Money and Markets website as your outlet.
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It’s been one heck of a tumultuous week — with stocks initially surging after the Federal Reserve rate hike … then tanking a day later. What does it all mean, and how are you reacting?
Reader Howard said he’s worried about underlying economic growth at this time: “The biggest concern I have are the real numbers, not the rubbery ones. What is the government doing to encourage real jobs and growth, not just seasonal fluctuations?
“Governments around the world can spend two weeks in France promising action on climate change, yet here on the ground, many folks are looking for real leadership on many other fronts.”
Reader David weighed in on the outlook for several markets in the wake of the Fed, saying: “Taking some money off the table and spending it into the economy is not that bad of a plan. I guess you could hoard it in your safe, too, but I don’t know if any people that think like that.
“Oil is about half what it was last year, having taken out its low and continuing toward a floor. You could go wrong building a position, but timing it out to think you’re going to hit it just right is tough. Gold is still early for me — maybe next year.”
For his part, Reader Ted F. offered the following take on stocks: “I have a bad feeling the market doesn’t know how to react to all the fun and games going on — all the junk bonds and loans used to buy back stock and buy other companies for way above their actual value. Now, the money is going to cost more and the hope has to be that the economy and markets for the overpriced buyouts will expand fast enough, and margins increase enough, to service the bonds and loans.
“Rerolling the loans and reselling the bonds will carry higher interest. The next will be which of the bonds and loans go bad. It looks like the subprime loans went from real estate to corporate. Like the old folk song says, ‘Who knows what tomorrow shall bring?'”
On the other hand, at least a few of you are going bargain hunting here. Reader Tommr said: “The ‘Wall of Worry’ is still very solidly in place. I think that after the ‘Triple Witching’ is over and the tax selling subsides, the markets will shoot higher. Just sayin’.”
Reader $1,000 Gold added: “I went ahead and bought a ton of stocks again yesterday. This is my third purchase during this correction. Basically, I put my money where my mouth is. if I’m wrong? It’s only money. I can always make more. But I gotta’ walk the walk, not just talk the talk.”
Thanks for weighing in. None of us can know for certain whether the recent turmoil is just pointing to a minor correction, or if it’s the start of something worse. But you know that I take my cues from my credit market indicators. They haven’t led me astray in the past, and they continue to point to more trouble ahead. So I will remain cautious heading into 2016 unless and until I see more stability in credit.
Have a great weekend — and try not to get stampeded at the mall if you’re doing some last-minute Christmas shopping. Or if you’d rather comment here than fight the crowds, go right ahead.
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Speaking of currency turmoil, another emerging market suffered a run yesterday — Argentina. The country’s peso plunged as much as 30% in value after its new president Mauricio Macro announced plans to ease capital controls, and bring the official exchange rate more in line with the black market exchange rate available on the street.
The Wall Street Journal expanded on the trend I discussed yesterday, namely that Treasury yields plunged yesterday in the wake of the Federal Reserve’s first short-term rate hike in more than nine years. It cited everything from strong global demand for U.S. debt to divergent monetary policy around the globe to economic worries.
Embattled hedge fund manager and drug industry whipping boy Martin Shkreli was charged yesterday with conspiracy to commit securities fraud, conspiracy to commit wire fraud, and other related civil charges. The 32-year-old pled not guilty and posted a $5 million bond as bail.
What do you think about the latest currency and bond market turmoil — does it signal that central banks are losing control? How about the Argentine default … does this show that the emerging market crisis is going to persist? Any other thoughts you want to share? Then visit the comment section below and post away.
Until next time,
Mike Larson
P.S. The United States is now even MORE of a safe haven than ever before. Larry Edelson explains how the Fed’s decision virtually GUARANTEES that the U.S. dollar and U.S. stocks will be in greater demand than ever before.
Click here to read Larry’s special report to find out how to profit from the Fed’s decision in the years ahead.
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Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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Does anybody in any of the central banks have a clue as to what is going on? Have the Central Banks so over managed the world’s economy that they have killed it? It doesn’t seem to be responding to life support.
Just how long will America remain a safe haven?? I believe the market is responding to the insanity of congress and dear leader who are doing their damndest to bankrupt us with dear leaders transformative measures. Spend,spend,spend. Redistribution-. Not on America or Americans but every third world cesspool and their muslim inhabitants.. Why will the military not arrest this treasonous dear leader before these imported terrorists kill thousands of Americans???
libra
It’s the people, we believe in fairy tales and free stuff.
Well well finally somebody that sees the light. Way to go Howard. Watch the GOP debates and then read “Ali Baba And The Forty Thieves” Picture the government as Ali Baba. In this case there are about a dirty dozen left to entertain you with their ravings from the past and promises that will be broken in the future. Voting like the stock market is rigged and a suckers game.
Iraq thanks all Americans for their contributions. Instead of rebuilding their war torn country they will be trying for a new world record for the tallest building on the planet. I think they are going to name it after W.C. Fields. Saudia Arabia presently has the go to build a tall building that will stand as the tallest till Iraq takes over. Who says these countries are in financial trouble. Friends and allies who needs enemies?
THE MONETARY SYSTEM IS BEING RUNNED AND RUINED BY INCOMPETENT FOOL,BUFFOONS AND CROOKS. ALONG WITH THE CROOKS ON WALL STREET THEY ARE COLLAPSING WHATS LEFT OF OUR SYSTEM OUR LIVES AND OUR SANITY.
Total insanity and heading for disaster on a global scale.
The great Recession of 1920-1921 was a blip on the radar screen because Harding and Coolidge did nothing but let the market play out. Hundreds of banks failed and by the middle of 1922, the economy skyrocketed after all the bad fruit fell off the tree fueling the big surge known as the Roaring Twenties. The key to the quick recovery was letting the market right itself vs all the wrong things Hoover and FDR did to cause the Depression. Bush and Obama mirrored these two guys and bailed out the banksters who created the mini-depression that started in 2007 and unfortunately has never recovered with a real unemployment still in double digits. The Fed has killed the dollar as real the real spending power of it is under a nickle. The impediment to global government, the USA, is now cracking and once we are taken down from within, the rest of the dominoes will fall.
What planet do you live on? If ever there was a classic Republican piece of misinformation,this is it!… :( Absolute historical Bull Crap!
Eagle well said the right wing nuts are filled with fear and hate.
Am I the only one that is sick of this stupid Republican v. Democrat nonsense? It’s pure theater. The only way to get back on the right track is to waste them all. Jim
Agreed Jim. This is a financial blog where we help each other to save and invest for retirement, not a theatre for Democrat v’s GOP ravings. No one wins with politics.
The real sad part is the right wing nuts and their big business buddies hate you and want to control you You are the cow that gives the milk. In “democracy” they desperately need your vote to do their dirty deeds. They will knock a few crumbs of the economic table to placate you.
I don’t get your first statement, Gordon. You must erroneously believe that the left-wing nuts and the unions love you and DON’T want to control you.
no eagle 495 your filled to the brim with B/S your always good at twisting the truth and telling lies this is for all you no brains liberals out there what ever happened to the 6 % + growth in the ecomony like obummer promised you people always lie cmon tell the truth lets face it the democrats have buried us all under a mountain of debt saying debt is good for us all your democrat president is the worst president n the history of this country he has literally doubled the national debt in his 7 yrs in office and you liberals all you can talk of is about what happened close to 100 yrs ago who cares………
Worse than Nixon.
Fact: Since 1929 annual gains under Democrats 10%… Under Democrats 0.4% Yes Alice, Politics does matter…. :(
The Dow, S&P, and NASDAQ have a long way to plummet…all the tinkering is like giving cool aid to a cancer patient. The true infirmities will come home to roost..there is no avoiding it. What are they? Huge national debt, bad corporate debt, huge consumer debt, including student debt; a corrupt congress, and a passive, iPhone toting public. The termites have eaten out the interior, a thin facade remains, but not for long…certainly, by 2017 the true ugliness will be apparent, and no cosmetic surgery will do any good.
And a president that refuses to stop the runaway spending game. The one dubious distinction of the obama administration will be: we doubled the national debt in 8 years.
Are you three for real or you simple paid GOP commentors….. Nothing you have said, could be further from the truth… :(
Eagle495
Put aside politics for a moment and look at why this economy is in trouble.
heres something EAGLE495 wont tell you in OBUMMERS 7ys as president we have seen the national debt nearly double from its now stands precariously close to 19 trillion that debt represents today a debt per citizen of $ 58,296 dollars per man , woman, and child so liberals get out your checkbook along with the rest of us, SEE giving everything away does have a price. AND while your writing that check lets face the real number and that is the debt per taxpayer in this country now stands at $ 157,183 dollars cmon people pay up …………oh wait the the debt today tomorrow it will be more so write another check AND if I haven’t scared your checkbook yet realize the unfunded liabilities per taxpayer today stands at at a whopping $ 840,704 thanks Obama this is mainly due to having a democrat president from 2009-2016 and having a democrat congress from 2006-2010 and having a democrat controlled senate from 2006-2014 oh one more thing to all of you out there just paying the interest on barack obamas spending spree costs each and every taxpayer over $ 4200 each year.
Hawk,
Rubbish… The deficit began to go parabolic when Reagan gave Huge tax breaks to the 3% but didn’t have the guts to cut Federal spending…. The those deficits went up every year since Reagan under Republicans, leveling off ONLY during the Clinton years… Government spending has actually fallen during Obama… The debt under Obama is the amount the Fed has spent to stop the Cheney/bush stock market crash… Those of you with investments are very grateful for that…Do your own research rather than reading the bogus reports from the GOP…
HERES something eagle495 you never mention recessions start 18 months before they actually show up as 2 quarters of negative GDP growth …………. and you forgot to mention that carter a democrat put us in a recession bill Clinton had another recession started one was declared shortly after he left office and that one was due to tightening of the economy raising interest rates I remember when he said there has been to much artificial money made in the market then lets not forget GW had to deal with 9/11/2001 that definitely stunted the market but what created the housing crisis was the liberals with ( its not fair that minorities weren’t taking place in the housing boom) criteria so banks were forced to give out loans to individuals who could never repay them ….. I saw these loans manifesting I knew there was going to be trouble …………….think of it like this who in their right mind would give someone a home loan without a verifyable source of income but because the democrats kept pushing on this issue it happened and then because the banks started going under from this program i.e. too many bad loans they in turn were bailed out by the democrats remember this THE CONGRESS WAS CONTROLLED BY THE DEMOCRATS FROM 2006 – 2010 THE SENATE WAS CONTROLLED BY THE DEMOCRATS FROM 2006 – 2014 AND THE PRESIDENCY WAS CONTROLLED BY THE DEMOCRATS FROM 2009 – 2016 so think about that a while and then its easy to figure out whos to balme for all this mess were in
Hawk,
You really need to get some formal education in historical economic analysis….. What you are printing here is just NOT true….. You seem to have NO IDEA how the economy and it’s leading indicator, the stock market works…. Again, genius, annual average stock market returns since 1929 under Democratic Administrations (40 years): 10%… Annual average returns under Republican Administrations (36 years): 0.4%…. Since this is an Investment Site, the above is VERY important!.. :(
Fred you forget that it is the Republican. Congress that controls the purse. They are spending just like the Dems.
And they’d spend more if they could get away with it. Their banker buddies are rubbing their fingers together – feed me… feed me.
and you would be the first to bitch if they shut the gov’t down to stop the excessive spendi you people are never happy. hope you got gold
That a Congress that has the biggest Republican majority since the Civil War enacts the Democrat agenda is all the proof you need to understand they are all on the same team. Jim
When the Democrat leader is a seventy year old woman in poor health, that waddles on water, wants to protect me by being nice to the enemy and disarming law abiding citizens and the Republican wants to carpet bomb the desert until it glows it should be obvious we are being ruled by sociopaths. Our leaders of tomorrow are insisting we revoke The First Ammendment and create ” safe zones” so no one gets their feelings hurt. Folks, we are not heading for the precipice. We have already gone over it. It’s too late. Jim
Yes your right. This house of cards must fold.
Hi Mike
Many seasoned observers understand that the Fed is still carrying the debts left over from 07/08 on its balance sheet. Who is going to rescue the central banks. Certainly not the people. If rates were between 4% and 5%, then this would represent a tax bill of about 12% of GDP. How are we ever going to repay the $18 trillion, or the unfunded liabilities going forward.
You all are on the wrong track everything is stalled because we aren’t moving the money into the real economy it’s still all locked away in bank vaults the market some business buying another one until it gets into a workers pocket and gets spent and starts to move nothing is going to happen giving people jobs letting them spend than taxing it will really turn things around volousity of money makes things move you buy and the next and it will start moving all the money that fueled the oil bomb
The systemic risks from systematically falsifying interest rates to mitigate the systemic risks that resulted from systematically falsifying interest rates are now coming to the markets.
Will
Ended up in. Hole in the ground it didn’t do a thing it made a few people rich all the maga billions wasted on holes in the ground now it’s all a bust build some new roads bridges pipelines to movewater to places that need it people need jobs jobs mean money money gets spent and things get moving AMEN
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The top tried to put the brakes on spending and the demos through a fit , shut the parks down which cost more money and blamed the shut down on the top stubborness. I really think we should come to an agreement on spending b 4 it’s to late. Put the fed money into infrastructure and jobs instead older bailing the big guys
Gentlemen,
This is supposed to be an investment site….. Politics happen to have a HUGE impact on our returns….. I’m seeing a lot of Republican BS and misinformation here…. For you people that think the GOP has a plan that will help us the average American, I urge you to read Alan Grayson’s article “Poor Dumb Rich People” He is a Harvard Educated Economist and Lawyer for came from little and worked his way through college. In my opinion, he is one of us…. This site will not allow me to post it here. This data goes back to 1929…… His findings are astounding…… Average Annual stock market returns under Democratic Administrations since 1929: 10%….. Average annual stock market returns under Republican Administrations since 1929: 0.4%…..
When I came out of Business School in the 70’s, I was a Republican despite doming from poverty and low income projects build by Democrats….. After many years in the Business World, I am now a Democrat as I have observed from the front lines which party has my best interest at heart….. My education has allowed me to become wealthy and I pay a lot of taxes. That said, I do not regret it as I have never forgotten where I came from…. Those were Democratic policies that gave me an opportunity to get ahead, not Republican…..
OK OK…………………….. TELL ME WHAT IS THE ……………………..PLAN OF HILLERY CLINTON ILL TELL YOU SPEND SPEND SPEND AND CREATE NEW FORMS OF TAXATION AND BERNIE SANDERS ALREADY SAID WE NEED TO SPEND ANOTHER $$$$ THIRTY TRILLION FOR WEALTH REDISTRIBUTION HILLERY IS ON THE SAME PATH AS BIG TOP EARS OBAMA ONLY SHE WANTS TO STEP IT UP …………………….. and you radical extremist liberals call it a ……..PLAN!!!!
Hawk,
No need to SCREAM…. And you might want to consider some anger management therapy. That said, facts are facts….. If the “radical extremist liberals” are doing such a rotten job of running the country, how do you explain the HUGE difference in annual average stock market returns since 1929 during their administrations?
The only thing that will restore the united states is LONG TERM FISCAL SUSTAINABILITY ask yourself this has any of that happened under the present democrat barack Obama administration it took several hundred years to run up that debt in the history of this great country of ours when George bush left his office it was a little over 10 trillion it now stands precariously close to 19 trillion giving everything away does have a price . One day and I guarantee this will happen ………………..one day the united states will hold its bond auctions and nobody will be buying ……………. that’s the day everything changes in America.
come on out of your dreams….. and wake up from your reverie….time is here, don’t go to sleep…… straight to running on the brink….. this heaven we got more fear…. but a dollar for my life absurd…. cause there trouble on the way … oh theres trouble on the way… oh get a dog and pony for our judgment day…….. here we are … round in circles, around around around ……………… around…… when nothings right just close your eyes…….. close your eyes and your gone……… dreams by beck eyeryone have a great morning
With all due respect to everyone and their varying opinions….
Frankly, I’m already extremely tired of hearing about who may or may not be the next POTUS…and we still have almost another YEAR of it to go! (That’s assuming we don’t have another problem with “hanging chads” or whatever may be today’s electronic equivalent.)
Whoever the winner may be, I am becoming more and more convinced that the office is simply a “figure head” position, and all the promises and hype we’re hearing today will soon be forgotten once the election is over.
The ones pulling the strings behind the scenes today will continue to be the ones pulling the strings, and all of us will still be “doing the dance” accordingly.
Robert,
With all due respect, this is an investment site, so the above figures should make a HUGE difference…… To make it clearer, if you had invested both ways the return from the 40 years of “Democratic Administrations only” over all those years since 1929, would be 167 times greater gains than the returns from the 36 years of “Republican Administrations only”!… I’d call that difference pretty significant, wouldn’t you?
We’ll see what happens………
yea and hence it is……………….. here are some honest figures everyone needs to deal with the debt per citizen in this country is now at $58,296 dollars for every man, woman, and child in this country the debt per taxpayer a more reliable number since more than half of all people pay no taxes is $157,183 dollars were paying over $4,200 dollars per taxpayer in high yield interest just to pay for obamas spending sprees and whats the scariest of all is the unfunded liabilities per taxpayer now stands at $840,904 so when the day happens that the bond auctions are held and nobody shows up ………..that’s the day reality sets in that’s the day everything changes in this country and if you haven’t figures that out yet don’t come here with your same old broken record Eagle495 just keep watching your cartoons. have a nice day
Hawk,
You know how to find a real debt chart? If you do then you will note that from Reagan forward, the debt has skyrocket… That is when he gave HUGE tax cuts to his handlers the 3%. Sadly Reagan did not have the guts to cut Federal Spending and therefore the deficit went parabolic up…….
Also, if you look at the debt charts from 1832 forward you will see that FDR did the same thing that Obama did to stop that Republican Stock Market Crash… Perhaps you would have the alternative of NOT stopping the Republican Crash, aye? Got any idea what it is like with All the banks closed because they are broke?
Likewise, this “will she or won’t she” plucking petals from the daisy regarding Yellen’s raising of interest rates is getting REALLY old as well.
The fact is that the old saying “don’t fight the fed” still applies…and even with the recent .25 point hike, the Fed promises to continue to be EXTREMELY easy with monetary policy and has taken great pains to make that message clear.
Bottom line, that equals more gains in the stock market regardless of who’s president!
In spite of the fact that the Transportations have been in decline for a year now, in spite of terrorist actions and further threats, in spite of ALL the negative things that may be said that would produce the “wall of worry,” the stock market will climb it and continue to go up!!
And now that they’ve had their plunge and retest this past Fall and have now gotten their “tightening tantrum” out of the way at this first little rate bump, our stock market will be “off to the races” again!!
That’s the way I see it….but I could be wrong…………
So, Janet and the Fed have raised interest rates a bit, and are expected to keep adding to them at future meetings. This is likely to cause the Dollar to climb against other currencies. The result will be to cause American exports and services to increase in cost in local currencies, elsewhere. American companies will lose business, especially to Asian companies, and the balance of payments deficit will also climb even higher than it already has. That lost business will translate into more lost jobs in this country, of course, which won’t help tax revenues.
The bankers who own the Fed can’t be too happy about these prospects. Congress may not be so quick to bail them out in the next banking crisis.
Chuck,
What Jobs? Your Republican buddies sent them all to Mexico with their initiative called NAFTA from the earlier Bush administration…… Oh, and let’s not forget the Republican trade deals with China earlier beginning with Nixon and brought by The One World Organization make up of the wealthiest 3% who donate virtually ONLY to the GOP….
Trust me, it is NOT the 3% that are now pushing the “Made In America” movement… Nope, those are just regular Americans who are realizing that every product manufactured by slave labor overseas is just one more American labor job lost……
well eagle495 lets face it I know you have a difficult time admitting it but the north American free trade agreement was signed by bill Clinton a democrat and a pronounced liar and cheat you never mention about George soros or warren buffet who are some of the wealthiest individuals in the world with their own agenda are profound democrats the keystone pipeline didn’t happen because Obama wouldn’t sign it under any condition why………. so the oil could be shipped by rail rather than pipeline benefiting warren buffets railroad empire
Look again genius… HW Bush and the Majority Republican Congress made that puppy up… Try Wikipedia rather than a misinformation site run by the GOP to try to hide the truth….. It was a done deal when Clinton took office… His signing was symbolic as the deal had already been inked by HW Bush with the Presidents of Canada and Mexico… What, Limphog failed to mention that?