Friday, December 11, 2015

Will the FED raise rates on Wednesday?

Hi Folks,

The big question is will the FED raise rates next week.  Virtually everyone on Wall Street believes that they will raise.  I guess I am the lone wolf who believes that they will NOT raise rates.

Although Janet Yellen recently changed her talk from "the fed may raise rates" to "if we raise rates, the next one will not come for a while",  I still believe the answer is no.  I wish and hope that they do raise rates because that is exactly what is needed.  The fact is the FED does not want to look foolish by raising rates and then shortly there after having to cut them back again and possibly start QE4.

If you look at the economic data, the economy is slowing.  Manufacturing numbers are at 6 year lows, employment numbers are weak, and the giant retailers like Walmart are getting crushed.  The headline 5.1% unemployment rate does not show the real situation.  The labor force participation rate is at 40 year lows and we are losing higher paying jobs.  The jobs that have been added in the past few years are mainly lower income jobs.

There are plenty of bubbles that will be popping with higher rates.  The auto industry is a giant bubble, the housing market is in a bubble, and the credit markets are in a major bubble.

I am still very bearish for the longer term(next 1-3 years) and I believe, as in my last post, that from here we make lower highs and lower lows going forward.  My long term target in SPY(SP500 ETF) is 89, currently trading roughly 206.

Thanks and Good Trading,


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