Did The Fed’s Luck Run Out On Friday The 13th? – Ep. 118

* Friday the 13 was an unlucky day on Wall Street
* The Dow was down over 200 points - the second back to back decline of over 1% since August
* What was happening in August? Everybody was convinced the Fed was going to raise rates in September
* Now, everybody is just as convinced that the Fed will raise rates in December
* Once again, as I predicted a week ago, the market sold off
* We are down over 650 points on the week
* Nasdaq is down today even more - 1-1/2%
* The carnage was once again led by the retailers
* Bad earnings out of Macy's Nordstrom's Walmart and others set the scene for new share price lows
* I have been warning about this all year, based on inventory numbers
* All the evidence is flashing recession
* The Fed has been saying that they are data dependent - open your eyes and look at the data!
* This data is consistent with the beginning of a recession
* Yes, unemployment is low, but unemployment is always low when recessions begin
* I think the Fed knows they are not going to raise rates
* The Fed minutes are coming out next week and we'll get an insight into the deliberation between the members
* All Janet Yellen said was that an interest rate hike was a "live possibility" - The market did the rest.
* They took the word "possibility" and assumed that it was a probability
* Let's look at the economic data that came in today:
* First, October Producer Prices - they were looking for a rise of .2, because last month, they actually fell by .5
* We didn't get .2; we got -.4
* As of last month, year over year producer prices have declined 1.1%
* Now they are down 1.6% on the year
* This is going the opposite direction of the Fed's goal of 2% inflation
* The worst number was retail sales:
* They were looking for a rise of .3, which is still not a big rise - but we got an increase of just .1
* To add insult to injury, they had adjusted last month's forecast to zero
* Also x auto, they were looking for a gain of .4 and instead got a gain of .2
* These numbers will subtract from Q3 and Q4 GDP
* We also got September inventory numbers:
* The consensus was a rise of .1, but instead we rose .3
* This rise was not a result of an increase of sales, it is because sales are not keeping up with inventories
* The inventory to sales ratio rose to 1.48 fro 1.47
* The last time we had this number was during the financial crisis
* I have been pointing out that these inventory numbers have been padding the GDP for the last several quarters
* This has been ignored on Wall Street
* This means future GDP will plunge as companies need to liquidate inventories and not replenish them
* Not only that, they will be liquidating their workforce
* The heavy layoffs may not happen this year - more likely they will come in January and February
* The odds are that the Fed is not going to raise rates in December and the odds against a rate hike as the market continues to sink, with more and more bad economic news
* This bad news about retail sales was unexpected by the market as evidenced by the sharp drop in share prices
* Is the Fed going to raise rates just as the economy is turning down? Not a chance.
* If they do, imagine how much worse the economy will be
* The question is: When is the Fed going to come clean and admit that they are not going to raise rates and will their excuse be and will the markets buy it?
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