Say Goodbye to "Accommodative"

Today the Fed surprised the market with a…no, no, no, there was no surprise.  The Fed raised rates 25 bps to 4.25% bringing the number of increases to 13, a very long baseball game indeed.  The Fed’s announcement was greeted with the predictable buying frenzy for a few minutes that took the Dow up about 100 points.  Most of the rest of the day was spent trading in a fairly narrow range but drifting a little lower in the final hour to only close up about 55 points.

Bonds were modestly up at the opening but faded into the announcement but generally recovered to close on the highs of the day.  This is not what the Fed has been hoping for.  They want the long Rates to go up but instead the Prices are going up and rates are going down or nowhere, you remember the conundrum.  

But, wait, the Fed not only is managing the short end of the interest curve, they are managing Adjectives too.  They removed the word “accommodative” from the monetary policy statement.  Maybe next time they can remove the adjective “measured”, then we can really have a good rally.  (yes, sarcasm)  I am truly amazed that the Fed has the market mesmerized into thinking that if only they change one word in the policy statement, that is bullish for stocks.  Aren’t there other things the market should be paying attention to?

Well, we think so and here are some of them.  Today:  1.) natural gas closed at a new high near 15.50 about double where prices were a year ago (about 7 to 7.50); 2.) retail sales, without autos, were down for the month of November.  Didn’t we hear that Thanksgiving sales were 20% higher than a year ago???; 3.)  Best Buy (BBY) announced it was lowering guidance for the quarter and the year and said desktop computer sales were a bit of a problem.  BBY lost 12% today;  4.)  Don’t forget that the Fed actually Did raise interest rates, they didn’t just lower the number of adjectives.

We continue our bearish stance.  There is very little reason to be long this market in any way shape or form.  BE CAREFUL and be selling.

Dow Industrials:  10,823.72   +55.95  (well below 10,950)
RYVNX:  18.34  (if you want to buy something, buy this)
TLT:  89.70
BGEIX:  14.50