It’s hard for me to be more clear about this then I’ve been. We will have much MORE QE in our future. Why there’s this talk about raising rates is little more than a farce.
If Yellen and her team of “can’t shoot straight monetary gangsta’s” moves forward and increases rates by even just .25%…in THIS environment…then all bets will be off for global equities/global economies. And yes, that means that the likelihood of a crash would then become very, very real.
Bottom line: the world looks to the US for “real” leadership. I was never a fan of QE in the first place…having only written 1000 articles against it over the years…but the FED made their decision to go for it, and in doing so, created a global economic Frankenstein. And, just as in the old horror tale, this Frankenstein will seek to kill its master as well, should the beast fail to be fed.
The FED’s the one that decided “this is WAR”…and that “all was fair”…now, they must see their original battle plan through, come hell or high water. Then, they have to hope like crazy that their long term plan to reinflate the economy will actually work. I’m in the camp that says “no way it works”…but I’m also in the camp that says “the worst case scenario is still 1-2 years away”.
PREDICTION: we will avoid both an economic and stock market crash…for now…and Yellen will not raise rates until next year at the soonest.
CHINA, THE MARKETS AND US FUTURES
Like Japan of the 80’s, today’s China has been shown to be much less of a global economic threat to US dominance than previously thought. As I’ve said, the US will lead the way out of this mess…and we should expect US stock prices to bottom first…followed by a major recovery move higher in China.
I DO NOT expect China to go through a near 30 year recession…which is what Japan experienced once their 80’s “power move” failed. The demographics and economic futures of Japan 1980’s v China today are just completely different…as in, VERY few parallels.
Overnight, China failed to move higher for the 6th straight day (losses of roughly 1.5%), but here in the states, US Dow futures show us opening 200 points higher. We saw 450 points disappear quickly yesterday, so anything is possible…but I remain optimistic.
If the world’s about to crash, why is gold down another $3/oz this am…and why is oil a bit higher? If the shorts aren’t asking themselves these questions…well, maybe they should.
You saw the sentiment indicators yesterday…as negative as ever (which is a reverse indicator of course, and a positive for markets). Assuming that the markets can stabilize, the short covering move higher could be pretty stunning.
Then, with an overnight ramp higher in China (which I fully expect!), we could see US markets rally big time once again…and guess what that might do? All of a sudden, the “TV guru’s” will be saying that this looks like yet ANOTHER V BOTTOM in US stocks…and man, would the shorts ever be in trouble then (just as we’re taking profits “again” and looking to reverse course).
Finally, the VRA now has net gains on closed out positions for the past 2 years of more than 1900%…and yes, this makes us #1…by far….again.