Wheee, that was fun!
The day went pretty much exactly as predicted in the morning and, other than CROX and NDAQ, both of which I still have faith in, pretty much everything we played on the day went up and that's a very good thing! Still it's all about the follow-through tomorrow but the one thing I took out of those Fed minutes was the statement that: "When prospects for growth had improved, a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate."
Wow, the Fed has heard of inflation, that's amazing! They are still totally wrong in what they did but at least they get the concept, to further quote the minutes (which aren't much more than a spun summary of the meeting): "Participants agreed that the inflation data that were received since the December meeting had been disappointing. But many believed that the slow growth in economic activity anticipated for the first half of this year and the associated slack in resource utilization would contribute to an easing of price pressures. Moreover, a leveling-off of energy and commodity prices such as that embedded in futures markets would also help moderate inflation pressures." So they were dead wrong about inflation and they have now driven it to the worst levels since Ford had to put on a "WIN" button to fight it but at least they are pretending they care.
Unfortunately, what they care about isn't you at all, I often say the Fed is there to protect the bankers, not the consumers, so listen to this gem: "Some survey measures of inflation expectations had edged up in recent months, and longer-term financial market gauges of inflation compensation had climbed. The latter probably reflected at least in part increased uncertainty–inflation risk–rather than greater inflation expectations; increases in nominal wages did not appear to be incorporating higher inflation expectations. On balance, expectations seemed to remain fairly well anchored, but participants agreed that continued stability of inflation expectations was essential." So the banks are raising rates in anticipation of inflation but the workers are falling way behind as their wages remain the same (even as their interest paid on loans skyrockets) and the Fed can look down on this and smile and call it "fairly well balanced."
There are only two reasons the Fed will be spurred to action, either you are making too much money relative to interest rates in which case they tighten rates so banks can increase their crack spreads with the bonus of slowing job growth that forces you to accept lower rates of compensation OR they will lower rates when the banks have squeezed the consumer so hard he finally breaks and can no longer fulfill his debt obligations. What a Fed cut does, first and foremost, is give the banks an emergency refinancing which, again, allows them to boost the lending crack spread and puts a few more people to work so they can start borrowing money to replace the losers that couldn't pay the last round of loans. Don't forget, when the bank forecloses on your home and writes it off as a total loss, they still like to sell it for 80% of it's value so they can book it as a cash gain later so they can tell you what great businessmen they are – to do that they'll be needing new customers!
Rather than get into it here, I'm going to update my Inflation Nation article and reprint it as it's been a while since we discussed that particular scam. Meanwhile, let us bask in the glory of the fact that, despite their totally irrational actions, the words the Fed used made them seem rational and that is reassuring the overseas markets that we might actually shut down the dollar printing presses one day and bring some balance to the dollar's diminishing supply and demand picture.
On the very bright side, this should take the wind out of the sails of the runaway commodity train but I'm not sure that the possibility of the end of the free money cycle is going to be able to get us back over 13,000, which still seems very far away at the moment. I'm still liking the market but we need to be patient. We got a surprisingly good report from TEX last night, with construction material sales doing very well on OVERSEAS sales. This is what I mean when I say that we are too globalized for a US slowdown to drag everybody down.
OII had a surprising miss and lowered guidance "due to weaker demand for shallow-water vessels and diving services." As I've mentioned before, the lack of actual exploration by the major oil companies is a crime against humanity. OII also will have 2/3 of it's fleet out of commision due to regulatory inspections next quarter so they will be nice buy once they settle down (maybe back at $57) as Chinese and European firms will continue to look for oil, even if US companies refuse to.
The most interesting move of the day was the murder of GRMN, who had great earnings and great guidance but mentioned in their conference call that GPS prices will come down substantially next quarter, which makes me think "great, they will sell more" but made investors think "bad, we'd better sell Garmin." Ironically, the point I made to members in yesterday's chat about how silly this reaction was came to me in an Email this evening as Apple invited me to check out the new $49, 1 Gigabyte IPod shuffle. THE HEADPHONES USED TO COST $49! If Apple crashes tomorrow over pricing concerns, then I'm wrong about Garmin, otherwise I say they are a BUYBUYBUY.
Tomorrow should be very interesting.
