Buzz Bits: Dow, Nasdaq Surge After Fed Cut
Your daily Buzz & Banter highlights...
Putting the "flation" in "Stagflation" - Lance Lewis - 3:21 PM
Do people need a map? Good grief, we can even see it described in the FOMC statement (see below). It's called stagflation, and we're firmly stuck in it. To make matters worse, the Fed just stoked the "flation" part with this 50 bp cut in Fed Funds today.
As expected, the FOMC move today is a formal signal that the Fed is going to try and inflate the housing bust away.
Like the old saying goes, don't fight the Fed... So what do we do? We bet with the Fed. We bet on more inflation. We buy Gold.
STAG: Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
FLATION: Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Positions in gold shares, GLD.
Perfect Storm for Bears - Quint Tatro - 3:10 PM
Regardless which way you slice it, the market is running on the Fed cut and stocks are surging. It is never good to get caught up in the emotion so if you feel yourself doing just that, consider taking a step away and getting ahold of yourself.
The point is we have a perfect storm of underinvested and short bears, and a Fed willing to do its part. There is no question there are problems, and the Fed taking such drastic measures definitely gives this argument credence however you must understand the performance anxiety that is now floating throughout.
I am letting my longs run here and while I did take a few quick gains in the pop, I am also looking to redeploy some new capital into fresh ideas.
As per my earlier post Hansen Natural (HANS) is breaking out of its cup and handle pattern and looks poised to attack all time highs in the $52.72 area. I will probably trade around the position a bit as I caught a nice gain today, however I will let most run and see how it acts going forward.
It is tough to find stocks that haven't already run and I don't encourage chasing. Let the action settle down a bit and find decent setups offering solid risk reward opportunities.
The bears will tell you this is only a band aid or possibly a tourniquet, but stocks are running and I wouldn't bet against them right here.
Position in HANS.
Aggressive easing at the Fed discount rate... - Sean Udall - 2:34 PM
...I think this is the key and certain stocks have the all clear going into next quarter's EPS reports.
Private equity could get a big boost from this and Blackstone (BX) and Fortress (FIG) are responding in a somewhat muted manner so far. I think these stocks represent excellent value given these surprisingly aggressive Fed cuts. I'm seeing some selling into the spike off the news, and that is to be expected as some folks are going to lock in some short term gains.
On a net basis these moves has me looking for strong GARP stocks as I believe we will now see a market turn its focus to more fundamental analysis and less Fed watching. Stocks with the strongest fundamentals and selling at reasonable valuations are excellent candidates and this should also be a shot in the arm for Growth to continue to outperform Value for the foreseeable future.
Positions in BX, FIG.
The Dollar Holler - Sally Limantour - 12:07 PM
The U.S. Dollar is now in the same area it was in during the autumns of both 1978 and 1992, based on both the USD Index and the European currencies.
In the fall of 1992, the last time we saw the dollar sink to current levels, George Bush was president and the U.S. was sinking into a recession. You might say the same thing about the U.S. today, exactly 15 years later.
I have been hearing so much bearishness on the U.S. dollar that I am beginning to think a contrarian move could happen. In both 1978 and 1992 the dollar hit lows and began to rally, much to the surprise of most people. Perhaps this could happen again. However, if the USD Index breaks 78.33, where it made an all-time low close in September of 1992, this could be the beginning of a new trend of a plunging dollar.
Still the contrarian in me is looking at Dollar Index options as a cheap way to play a possible rally.
Stump the Schwab - Ryan Krueger - 10:37 AM
I note that Schwab (SCHW) had estimates raised this morning by an analyst citing activity in August. It's the less discussed side of the market fears and wild swings – that instead of predicting the market's next move, the less crowded trade may be to "take the rake" as I have buzzed about, often, surrounding many names in the past that collect the Vig from both winners and losers.
Schwab intrigues me more than other brokers because my firm's work shows that it is gathering assets (on its institutional platform for money managers, and in individual retail accounts) at a better pace than many of its competitors, and it is doing it rather quietly. This ain't your 90's do-it-yourself discounter, and I think investors may underestimate the secular tailwinds behind a new group of institutional and individual accounts that are less interested in financial supermarkets than the big brokers thought, and more interested in old fashioned trading accounts.
And trading is good.
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