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Five Things You Need to Know: What We Know: Rates on Hold; What We're Guessing: Fed Bias Unchanged; Consumer Confidence: Where Did It Go?; Dr. Brett Beats the Market; Animated Financial News and Entertainment? Ridiculous! Oh... Wait.


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. What We Know: Rates on Hold

So here we are... waiting. In about three hours the Federal Reserve Open Market Committee will announce what everyone already knows, that rates will remain unchanged at 5.25%.

  • After two days of meetings the Federal Open Market Committee will announce their decision on rates at 2:15 p.m. EST.
  • All 93 economists surveyed by Bloomberg expect the Fed to keep short-term rates unchanged at 5.25%.
  • All told, no drama surrounding the FOMC decision on rates today.

2. What We're Guessing: Fed Bias Unchanged

It's what the FOMC says after they announce the decision on rates that is the key.

  • While everyone is anticipating no change on rates, there is some disagreement on what, if any, tweaks the Fed will make to their accompanying statement.
  • Recent accompanying statements to the Fed's interest rate decisions have each painted a picture of "moderate" economic growth with a bias toward tightening based on "a high level of resource utilization."
  • We think there will be no change to the statement today, and we base that view on the following excerpts from the minutes of the last FOMC meeting:
    "In their discussion of the economic situation and outlook, meeting participants noted that the economic information received since the last meeting pointed to a somewhat more favorable outlook regarding both inflation and economic growth than they had earlier anticipated."
  • That was true... until we saw more recent unfavorable data on inflation:
    "Incoming data suggesting a leveling out in housing demand and strength in consumer spending outside the housing sector supported the view that the expansion remained resilient despite the appreciable decline in housing activity and recent weakness in the manufacturing sector."
  • And that was true as well... at least until we saw the most recent downtick in consumer spending and worsening consumer-related data, such as banks tightening lending standards, monthly declines in both average weekly earnings and home prices.
    "Favorable readings on core inflation and lower energy prices had also improved the odds that inflation pressures would diminish. However, it was noted that the prevailing level of inflation was uncomfortably high, and resource utilization was elevated. The upside risks to inflation remained the Committee's predominant concern."
  • And therefore we will likely have no change to the accompanying Fed statement.

3. Consumer Confidence: Where Did It Go?

The weekly ABC News/Washington Post consumer confidence index fell sharply in the week ending March 18, declining seven points, its biggest drop in more than two years.

  • The ABC News/Washington Post consumer comfort index fell seven points to -5 in the week ended March 18, from +2 a week earlier.
  • According to the survey, 42% of respondents expressed confidence in the economy, down from 47% the week before.
  • In assessing the buying climate, 39% of respondents said it was good, down from 42% a week earlier.
  • On the bright side, 61% of those polled said their own finances were in good standing, but that was down from 64% in the prior week.
  • The index can range from 100 (everyone positive on all three measures) to -100 (all negative on all three measures).
  • So we'd characterize consumer confidence as deteriorating, but at -2 still "fair to middlin'."

4. Dr. Brett Beats the Market

Dr. Brett Steenbarger, one of our favorite writers on trading strategies and psychology, today has uncovered "A Mechanical Strategy That Has Produced Consistent Stock Market Profits." If it sounds too good to be true, then that's only because, for most of us anyway, it is, though not for the reasons you might think.

  • First, although we encourage you to go read Dr. Brett's study for yourself, let's cut to the chase. What is the bottom line?
  • The bottom line is that the average return for the mechanical strategy - tested over 82 historical periods without using any leverage whatsoever - is 14.17%.
  • That doesn't include dividends and their reinvestment.
  • How does it work? Ah yes, that's the kicker.
  • You simply buy the Dow Jones Industrial Average at the end of the last trading day of the year and you hold the position for 25 years.
  • That sounds easy enough, but... (there's always a but):
    "[T]hink of the psychological fortitude it takes to participate in this strategy. An investor needs to ride out bear market drawdowns, periods of economic recession, oil shocks, inflation, and myriad geopolitical crises."
  • Indeed, most of us - the vast, vast majority of us - simply are not psychologically built to use this as part of an investment strategy.

5. Animated Financial News and Entertainment? Ridiculous! Oh... Wait.

According to the Hollywood Reporter, financial television network CNBC is developing an animated series which could become a full, half-hour series on the network in the fall.

Animated financial news and entertainment?!?! Hahaha! That's ridiculous! Oh, wait... now that we think about it, that does sort of ring a bell.

  • CNBC will reportedly air five one-minute animated shorts that will be cut from a pilot based on a cartoon written by Los Angeles executive recruiter Tom Stern.
  • It isn't immediately clear where CNBC will slot either the animated shorts or the cartoon series, though a likely destination is primetime, according to the Hollywood Reporter.
  • This would mark the first time the business channel has delved into animation.
  • Though likely not the last.
  • Minyanville has learned CNBC ultimately intends to animate their entire network programming!

    So, I guess this is good news for guys like us, right Hoofy?
    Boo, you don't know the half of it. This isn't just "good" news, it's spectacular news!!!
    Yeah, but I heard they're thinking about going with total animation, 24-7. Surely that's not true.
    You heard correct, my friend. Total... animation. The whole shebang.
    You know Squawk Box?
    That morning thing with the guy with the weird Eraserhead hair?
    Gone! They're replacing it with a series called SpongeStock SquawkPants.
    Whoa! That's aggressive. What about Morning Call with Liz Claman?
    Two words. Pokemon.
    That's actually just one word.
    You didn't let me finish. Pokemon Portfoliomon.
    That's creepy.
    It makes total sense, though. No one can explain what's happening in the market better than Pokemon Portfoliomon. Watch those stocks rally! Gotta catch 'em all!
    What about Maria Bartiromo? She's a franchise player.
    Nope. Gone! And Boo, I think you may see a familiar face when the animated version of Closing Bell shows up.
    Hey guys!
    Daisy!? You're replacing Maria Bartiromo?
    Well, my agent told me not to say anything until the contract is finished, but let's just say I'm not going to be flying commercial much longer, if you know what I mean.
    See Boo, it's a total overhaul!
    Power Lunch?
    Powerpuff Girls.
    Kudlow & Company?
    Also Powerpuff Girls... only they all wear loud pinstripe suits.
    Mad Money?
    I thought that was already a cartoon.
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No positions in stocks mentioned.

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