Party Till The Next Summer(s)
Looks like it is not Obama’s September – backed off on Syria and now backed down by Summers. NSA must be working overtime to decide that Summer’s would not be good for popularity ratings.
“more than 350 economists have a signed a letter to President Barack Obama calling on him to nominate Federal Reserve Vice Chair Janet Yellen to be the Fed’s next chairman.”
It is Yellen vs Kohn left, both of whom are perceived as more dovish than Summers.
The relief rally today could not have come at a better time. Turning the tide the way of the borrowers again and carrying on the momentum for EM which began recovering last week.
The market has assumed the right to live another day, on borrowed time for a dovish taper on the 18th. Running ahead of itself ?
Stanley Druckenmiller Interview on Bloomberg
On his main focus right now:
“I’m very focused on the new Fed chairman, which – and I’m perfectly willing to wait a few weeks to find out.”
On the proximity of the next bear market, the impact of QE, and its inevitable withdrawal:
“As long as the Fed is printing money, [the next bear market is] not very close. That’s why the issue of tapering and where we go with it is so important. I don’t really care whether we go to 70 or 65 in September. But if you tell me QE is going to be removed over nine or 12 months, that’s a big deal because it’s my belief that QE has subsidized all asset prices. And when you remove that subsidization, the market will go down…My first mentor and boss, Dr. Ellis in Pittsburgh, used to tell me it takes hundreds of millions of dollars to manipulate a stock up, but the minute you have this phony buying stop, it can go down on no volume and it can just reprice immediately. I personally think as long as this game goes on, assets will stay elevated. But when you remove that prop – and let’s face it, the Fed has said they’re targeting those asset prices – those prices can adjust immediately”
On his current positions:
“I don’t want to hedge, but I probably have the smallest positions I’ve had in – I had some big positions earlier in the year. I’m sort of sitting and waiting. ”
My grandfather who liked his Shakespeare used to preach to me when I was little, “neither a borrower nor a lender be”.
It just struck me that in today’s markets how disruptive QE has been to a free market concept that we are now reduced to thinking like a bunch of druggies just waiting for the next high.
As a note of caution, Citi has this to say.
“Expectations for the announcement of a ‘dovish taper’ at this FOMC meeting had already become consensus, so the hurdle for the FOMC to surprise markets with dovish guidance continues to shift higher. Accordingly, we caution investors against building large positions in response to the Summers announcement.”
The S&P 500 will probably break 1700 tonight. We will know in the next few days if it will make a double top.
As for bonds, don’t be the last one to leave the party.