FOMC Announcement Keeps “Transitory” Language

The FOMC Announcement released today shows that the Federal Reserve continues to view the currently slowdown in the U.S. economy as nothing more than a “transitory” phase.

Overall I think it is a dovish statement. It acknowledges weakness in Q1 and it didn’t offset that with positives, other than to say weakness is transitory. It gives no clues about the timing of a first rate hike.Source:

We need to watch the GDPNow forecast for the Q2 2015 GDP estimate. If we see a massive turn around in Q2 2015 GDP estimates, I think we get a rate hike by September 2015 at the latest. Bar some spectacular turnaround, I think we can say rate hikes for June are off the table after the FOMC Announcement today.

FOMC Announcement Shows Small Downgrade Of US Economy

The Fed’s language changed to be slightly more bearish on the economy than they were at the March meeting. Household spending was changed from “rising moderately” to “declining”. Business investment was changed from “advancing” to “softening”. Exports changed from “weakening” to “declining”. Labor conditions were changed from “improving” to “moderating”.

Below is a word cloud of today’s FOMC Announcement (click on the image below to enlarge):

fomc announcement word cloud

Durable Goods Orders Huge Beat and Trending Higher

Durables orders rebounded 4.0 percent in March. Analysts called for a 0.5 percent increase. Wow but here’s the rub. This was all due to robust vehicle and aircraft orders.

Transportation surged 13.5 percent and that’s what made the Durable Goods Orders report beat expectations. That’s not exactly a measure of the U.S. consumer or broader economic activity. Nondefense capital goods orders excluding aircraft fell by -0.5%. Economists were looking for a +0.3% gain. Still, the stock market responded nicely to the report and that means so should we.

Durable Goods Orders

Outside oil, we think capex is rising at a decent clip, as it was before oil prices collapsed, but this is being swamped, temporarily, by the oil hit. The Fed, has to set policy based on the state of the overall economy, not any particular sectors, and we expect strength in the services sector to offset oil weakness and keep the labor market tightening rapidly over the next few months.Source:

Notice the right side of the chart that shows a series of higher highs and higher lows. That’s an uptrend folks. Since September 2014, Durable Goods Orders have been uptrending. Notice too that the previous swing high resistance at 1.9% in January 2015 was broke. In fact, the +4% headline number is the fastest rate of growth since the big move back in July of 2014.

Orders for durable goods show how busy factories will be in the future, as manufacturers work to fill those orders. The Durable Goods Orders report provides insight into demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies spend more on equipment and other capital, they are obviously experiencing sustainable growth in their business.

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New Home Sales Growth Slows But Trend Still Up

New home sales growth fell 11.4 percent in March to a seasonally adjusted annual rate of 481,000 units. That was the biggest percent drop in growth since July 2013.

I spoke with a trader today who told me new home sales dropped and the economy is therefore in trouble. Oh man, on some days people just give me a headache.

New home sales are still growing! In fact, 481,000 homes were sold in March. Folks, let’s be clear about something. It is the rate of growth that fell, but the trend is still up.

Today’s new home sales report shows how important it is to chart the raw data. Charting gives us perspective.

New Home Sales Chart

The stock of new houses available on the market rose 1.9 percent last month to 213,000. Supply still remains less than half of what it was at the height of the housing boom, good news for home builders who will need to ramp up construction.Source:

The chart shows that new home sales are still up +19.3% from a year ago. In March of 2014, new home sales came in at 403,000. In March of 2015, they came in at 481,000. How so called “analysts” could interpret this data as “the sky is falling” is beyond me.

The trend on the new home sales chart above is clearly up. We have a big down turn from today’s report BUT think of it like this. If this was a stock chart, would you go all in on the short side in a bet this chart was going to go lower? No, of course not. You would be waiting for a bigger pull back before going short and betting that the market would reverse into a strong downtrend. That’s the same way you should think of the new home sales chart in my opinion.

Existing Home Sales Bounce 6.1 Percent in March 2015

The existing home sales report was released this morning and it was good. Existing home sales surged 6.1 percent in March to a 5.190 million annual rate. This is the best rate of growth since December 2010.

Check out this chart I created that shows existing home sales going back to January 2014:

Existing Home Sales Chart

Home sales will see their best year of the economic recovery in 2015, rising to nearly a 5.5 million rate later this year.Source:

That looks pretty awesome, right? Could the Federal Reserve with their secret super-duper economic computer simulation and forecast of the U.S. economy strengthening in the second half of 2015 actually be correct? I’ve been disappointed too many times over the last 6 years to drink the Federal Reserve Kool-Aid. Nevertheless, as traders we gotta give props to where props are due. Existing home sales bounced back hard in March 2015 and the stock market was up today on the news.

The Global Oligarchy and the Flow of Money

For stock traders, it is helpful to understand the global oligarchy and how money flows through the global financial system.

According to company 10K filings to the SEC, the Four Horsemen of Banking are among the top ten stock holders of virtually every Fortune 500 corporation.Source:

The last global financial crisis briefly revealed the structure of the oligarchy. Remember how the oligarchy was able to shut down Congress at the drop of a hat and pull everyone out of meetings and other sessions into an emergency congressional meeting? Remember how they completely changed the rules of stock trading by preventing short selling of financial stocks when the stock market started to crash? What power. No other group on the planet, not even the President of the United States, has the power to instantly halt Congress and pull all congressmen into an emergency meeting. That was the global oligarchy telling Congress that the financial house of cards was crashing down and how much money they needed to prevent a collapse of the entire global financial system.

If everything was not concentrated into a ruling oligarchy at the top, like a pyramid, the entire global financial system would not have been in danger of collapsing. Everyone would be doing their own thing and so the risk of collapse would have been contained to a sector or two. The very fact that the entire global financial system was on the verge of collapse proves that a small group of people and corporations control everything.

the global oligarchy

That means the real power to control the world lies with four companies: McGraw-Hill, which owns Standard & Poor’s, Northwestern Mutual, which owns Russell Investments, the index arm of which runs the benchmark Russell 1,000 and Russell 3,000, CME Group which owns 90% of Dow Jones Indexes, and Barclay’s, which took over Lehman Brothers and its Lehman Aggregate Bond Index, the dominant world bond fund index. Together, these four firms dominate the world of indexing. And in turn, that means they hold real sway over the world’s money.Source:

The four big banks (Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo), own the four big oil corporations (Exxon Mobil, Royal Dutch/Shell, BP Amoco, and Chevron Texaco), which own the four big investment firms (McGraw-Hill, Northwestern Mutual, CME Group, and Barclay’s), which are the top ten stock holders of most Fortune 500 corporations, and these Fortune 500 corporations have ownership in most everything else.

The existence of a global oligarchy explains why the Federal Reserve is making plans to raise rates by the end of 2015, even in the face of a rapidly slowing U.S. economy. Clearly, the global central banks are working together and its the ECB’s turn to devalue their currency and inject stimulus and QE programs into their economies.

Currencies are measured in relative value to each other. If the U.S., Europe, Japan, and China, all devalued their currencies by 10%, it would have virtually no impact on the economy. Each country would be devaluing their currencies in lockstep so that no one would benefit from a lower currency in terms of export prices. This fact alone proves that some type of global financial coordination has to take place between central banks around the world. This explains why the ECB has patiently waited for the Federal Reserve to end QE before starting its own QE.

Follow the QE

The reason the U.S. dollar is strong is not so much what the Americans are doing but rather what the Europeans are doing with quantitative easing,” adds Mauro Guillén, Wharton management professor and director of The Lauder Institute.Source:

Understanding the global oligarchy will help you profit from one of the best plays on Wall Street right now: European ETFs and funds. European stocks have been on fire after Draghi announced the first ECB QE program ever. Immediately following that news, hundreds of billions of dollars flowed out of U.S. stocks and into European stocks. That was the “smart money” following QE around the planet.

We have all heard the old cliche “Don’t fight the Fed”. I have coined a more accurate and beneficial saying for stock traders, “Don’t fight the global financial oligarchy else you’ll end up like Russia, pissed off and broke.”