Sitting on Santa Bernanke’s Lap is Never a Good Idea

Sitting on Santa Bernanke’s Lap is Never a Good Idea
By: Kenny Polcari, NYSE Institutional Floor Broker

Hurry up and WAIT, that seems to be the mantra these days. What has the Fed done since June? They have kept everyone and the mkts on hold, with only the talk of more stimulus, more QE, more waiting.

Will we get more of the same today? I think so – Germany took some of the pressure off – it is time for the Fed to back off.

Yesterday stocks did more waiting, and although they did move up (10 pts) to another “multi-year” high – investors and traders stood still – awaiting the Fed decision today. 73% of analysts surveyed by the WSJ are betting on a formal, announced QE program, 15% expect nothing today but a move by year end, while 11% are calling for no action at all before 2013.

Conflicting signals are everywhere, kind of “keep ‘em confused,” mkt not sure but is betting on an announcement – again. Even a warning by Moody’s that they were considering lowering the US debt rating was of no relevance to a market that believes the Fed is about to open the flood gates.

Remember – he is in a tough position…with the election only 2 months away you have to wonder how much of this is really about jawboning ahead of the elections. We are about to find out.

Let’s talk confidence for a minute: Confidence in the financial market continues to break down – investors realize that the mkt feels rigged. The trade feels forced. This is why volume has been plunging over the last couple of years. And this is why the Fed should back off. Unlike QE 1 – which was a successful program on a number of levels, each subsequent program has produced little in the way of benefit OTHER than force the mkts higher; and the thinking is that with equity mkts on the rise – then people will FEEL wealthier and go out and spend. Really?

Rather than stimulating real growth, the Fed is actually intensifying the ongoing recession by keeping the global economy in a perpetual state of “commodity shock”, forcing people to protect their capital and save. The Fed is offsetting the true benefits of low interest rates by continuing to print money and debasing the dollar.

Yesterday we learned that US household incomes fell to 1995 levels. Median annual income declined for the 4th straight year to $50,054 at 8.9% below the 1999 peak of $54,932. Poverty rate held steady at 15% – what this report says is that Washington had better wake up, legislators must come to the table, Congress must act. Just as a point of reference – 1995 takes us back to Coolio’s “Gangsta Paradise” as billboards #1 hit, followed by TLC, Seal and Boyz II Men.

So if the Fed rolls out QE3 in a big way, we will see stocks move higher for a bit – but the economy will crash post-election as we move over the fiscal cliff; because, at best, all Washington will do is “kick the can down the road”.

How long can stock prices go up with the economy and corporate earnings crashing? Yes – corp balance sheets are strong – but forecasts last earnings season were not exciting at all were very sobering, corporations are NOT hiring. In fact we continue to hear many are firing, regulation, taxes, etc all remain unclear – thus paralyzing employers. When will they start listening to the cries of the people?

Overnight in Asia – mkts lower. Japan was the out performer – as Apple’s Iphone 5 launch means lots of new business for that country’s tech sector, expectations are for some 50 mil phones to be sold by year end: Nikkei 225 (Japan) +0.4%, China -0.8%, Hong Kong -0.14%, ASX -0.5%.

In Europe this morning, mkts are also moving lower waiting on the Fed. Volumes remain subdued, banks and resource stocks leading the way: FTSE flat, CAC 40 -0.3%, DAX -0.3%, Eurostoxx -0.5%, Italy -0.6%, Spain -1.1%.

US futures are down 2.5 pts right now at 1437. Expect nothing in mkt movement until the moment arrives. Media will be speculating all day on what will happen, but investors remain paralyzed. More jawboning may produce a bit of pressure (1420) as traders will throw a temper tantrum, but I do not expect a meltdown at all.

If they announce a program – look for a quick rally – only to be met with resistance at 1450.

Intrade is reporting that Obama odds of winning now stand at 64% up from 57% only days ago, and if you are looking for an opportunity to pick up some cheap real estate – here is a list of American cities getting clobbered by continued foreclosures – Ventura, CA, arietta GA, Phoenix/Scottsdale, AZ, Tampa/St. Pete, FL, Jacksonville, FL, Melbourne, FL, Fort Myers, FL, Orlando, FL, Vallejo, CA, Sacramento, CA, FT Lauderdale, FL, Rockford, IL, Chicago, IL, San Bernadino, CA…and the list goes on.

Take good care –
KP

Chilean Sea Bass in a Sherry Cream Sauce – Sounds good no? It is –

Preheat oven to 425 degrees.
Rinse the fish and pat dry. Marinate in a bit of olive oil, fresh lemon juice and s&p. (if you have a favorite additional seasoning – feel free) Coat the baking pan with olive oil and place fish in oven – bake for about 15 or 20 mins.

While this is baking – prepare the sherry sauce. You will need: Butter, garlic, minced shallot, clam juice, heavy cream, sherry, s&p.

Melt the butter (3 tblsp) on low heat…smash and then mince 1 clove of garlic – add to butter. Sauté…now add the minced shallot and about 1 tblsp of clam juice. Stir. Next add sherry – like 2 tblspn and 1 cup of heavy cream. Simmer for 5 mins – sauce should reduce by 1/4. Taste. Season with s&p…taste again. Good?

Now remove fish from oven and present on a warmed plate on a bed of wild grain rice. Spoon the sherry cream sauce on top and serve immediately. You can complement this dish with steamed string beans and a large mixed salad. Total time to table – 35 mins. Enjoy with your favorite chilled white wine – nothing fruity.
Buon Appetito