2%.
That's the target rate for the end of the year so 1.5% to go is a lot of rate hiking and many members of the FOMC would like to go with a 0.5% hike at the next meeting on May 3rd and they kind of have to – because there's only 5 meetings after that. We had a long discussion about it in yesterday's Live Trading Webinar ("Deep Dive into Rates and FOMC Minutes"), so I'm not going to get into it again this morning but, to sume it up – "Everything is proceeding as I have foreseen" which, unfortunately, is not a great thing.
What remains to be seen is how the Bond Market will react to the Fed fixing their balance sheet reduction at $95Bn per month and it makes us wonder who is going to be buying Treasuries if the Fed is going to stop? At the moment, we have Russian Oiligarchs clamoring for liquid US Funds so we have no problem selling notes to their proxies (oh grow up if you think that's not happening!) but what happens when we have to have real auctions – how much will the US have to pay to borrow the next $3.5Tn that's budgeted over the next 12 months.
And that deficit is WITHOUT addressing Climate Change which, according to the UN's Intergovernmental Panel on Climate Change (IPCC), the US alone will need to commit $2Tn per year between now and 2030 in order to meet our goals of halving emissions by then. That's 10% of our GDP and most countries need to do the same and, so far, none are.
According to the report, we have passed the window where we can hold Global Warming down to 1.5 degrees Celcius – which is where we needed to be to avoid catastrophic consequences that will cost us more than $2Tn per year to deal with – like the partial or complete loss (in 25 years) of Miami, New Orleans, New York, Atlantic City, Key West, Galveston, Seattle, Los Angeles, Charleston, San Diego, Fort Lauderdale, Hoboken, Honolulu…
This IS happening people and they are talking 2050 – so maybe not so smart to take a 30-year mortgage on new homes near the coast and now we're not being future smart financially since not spending $2Tn now for 10 years is going to cost us $2Tn forever after as we will have to wall up our coastal cities to try to keep the sea out while our crops fail and our waterways dry up and they'll have to start using Category 6 and 7 to describe hurricanes, etc.
Ultimately, the money WILL be spent, it's just a question of when and doesn't it make more sense to spent it now to avert a catastrope than spend it later to clean up the catastrophe we could have prevented? Logic says yes but the GOP, unfortunately, says no and so, our children will suffer – badly.
There's not much news to move the markets today but they'd better get moving as our retracement (from the top) chart looks like this:
- Dow 36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong)
- S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong)
- Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong)
- Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)
Those "to" lines aren't supposed to turn red and they are ALL about to be red. Those "to" lines were the original drops we had off the top in January – BEFORE the bigger collapse. So, in January, when those lines failed – this is where we went:
- Dow 36,000 to 28,800 would be a 7,200-point drop with 1,440 bounces to 30,240 (weak) and 31,680 (strong).
- S&P 4,800 is 20% above 4,000 and that makes it an 800-point drop with 160-point bounces so 4,160 (weak) and 4,320 (strong).
- Nasdaq is using 13,500 as the base. 14,100 is the weak bounce and 14,700 is strong.
- Russell 1,600, would be about an 800-point drop with 160-point bounces to 1,780 (weak) and 1,960 (strong).
So the Nasdaq is telling us we should be looking back down at the 20% corrections and if ANY of the other indexes fail their strong bounce lines (Russell is 2,010, S&P is 4,463) – then we are going to have to start expecting a big gap down – again.
Be very careful out there….
