Today one of the greats in the business sent King World News a fantastic piece that covers everything from Adam Smith’s “The Money Game” to Jeff Gundlach’s comments about the Fed.
November 10 (King World News) – From Art Cashin’s notes: The Backlash Begins – Fabled bond guru, Jeffrey Gundlach seems to have some strong reservations about a possible Fed move in December. Here’s a bit from Bloomberg:
A December interest rate increase would threaten U.S. stock and bond markets while potentially driving up the value of the dollar to the point where it weakens the economy, according to Jeffrey Gundlach, chief executive officer of DoubleLine Capital.
“I have a hard time believing a Fed tightening will help the economy,” Gundlach, whose Los Angeles- based company manages about $80 billion, said Monday on a conference call with investors. “I think volatility will increase and the economy will weaken.”
The odds of a Federal Funds rate increase by the central bankers in December stood at 68 percent Monday, according to Bloomberg data, surpassing the 50 percent level last week after the Bureau of Labor Statistics said the unemployment rate fell to 5 percent in October as the U.S. added more jobs than expected. On Monday, the Standard & Poor’s 500 Index lost 1 percent, an indicator investors are concerned about the impact of a potential rate increase, Gundlach said.
“For the time being,” Gundlach said, the threat of higher rates “will hurt the stock market.”
Who’s next – the IMF?
They’re Watching Me – I Know It – One of the most common foibles I have seen over the decades is the personalizing of an investment. “It’s all about me!”
We believe that the gods of finance are obsessed with our every move. If we sell Consolidated Acme Widget.com the stock will immediately soar. This hesitation tends to make people hang on too long to losers. The gods also toy with us by running up the stock we’re thinking of buying. We also tend to buy stocks that “say” something about us. And, if it doesn’t we concoct a reason why it does.
Adam Smith, summed this all up in a neat little paragraph in “The Money Game”. It reads like this:
A stock is for all practical purposes, a piece of paper that sits in a bank vault. Most likely you will never see it. It may or may not have an Intrinsic Value; what it is worth on any given day depends on the confluence of buyers and sellers that day. The most important thing to realize is simplistic: The stock doesn’t know you own it. All those marvelous things, or those terrible things, that you feel about a stock, or a list of stocks, or an amount of money represented by a list of stocks, all these things are unreciprocated by the stock or the group of stocks. You can be in love if you want to, but that piece of paper doesn’t love you, and unreciprocated love can turn into masochism, narcissism, or, even worse, market losses and unreciprocated hate.
Think back to “the bubble”. People became emotionally involved. And as you recall from your adolescence no amount of warning or logic can easily shift an emotional attachment.
Anyway, we hope today is busier. It would be nice to get back to data discussion and interest in interest rates. Philosophy and the sociology of investing can give you a headache if overdone.
Overnight And Overseas – China inflation numbers drop to multi-month lows. That weighed on the Shanghai market a bit. It also spooked the Australian market somewhat. Emerging markets are weak again, hitting multi- week lows, Indian and South Korean markets really got dinged.
In Europe, markets are generally lower but only modestly so far. Financials lead on the downside. Commodities are mixed but copper is getting crushed as is zinc. Dollar gains against both the Euro and the yen. Yields on Treasuries are down a smidge. Crude is mixed despite rumors of a large build in inventories after the close.
Moody’s called for lackluster growth over the next two years and said policymakers lack tools to counter any unexpected negative shocks.
Consensus – Traders will watch how the S&P handles any weakness around the 200 DMA (circa 2064). Crude remains important, especially with rumors of a potential large inventory build after the close. Stick with the drill – stay wary, alert and very, very nimble. ***KWN has now released the powerful audio with one of the top economists in the world, Michael Pento, where he discusses what to expect in gold, silver, of the year, what surprises to expect as well as how investors can protect themselves, and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Important Update On The War In The Gold And Silver Markets CLICK HERE.
***KWN has also now released the extraordinary audio with former U.S. Treasury official, Dr. Paul Craig Roberts, where he discusses the desperation of Western central planners, the global Ponzi scheme, how it will unravel and collapse, the rigging of the major markets, the corrupt media’s role and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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