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Weekend Reading: Copious Cognitions

Written by Lance Roberts | Dec, 16, 2016
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copius-cognitions

Over the last few week’s I have discussed the post-election surge in the market based on rather optimistic outlooks as opposed to the technical underpinnings that currently exists. As I specially stated in last weekend’s newsletter entitle “Dow 20,000”:

“If this market rally seems eerily familiar, it’s because it is. If fact, the backdrop of the rally reminds me much of what was happening in 1999.

1999

  • Fed was hiking rates as worries about inflationary pressures were present.
  • Economic growth was improving 
  • Interest and inflation were rising
  • Earnings were rising through the use of “new metrics,” share buybacks and an M&A spree. (Who can forget the market greats of Enron, Worldcom & Global Crossing)
  • Stock market was beginning to go parabolic as exuberance exploded in a “can’t lose market.”

If you were around then, you will remember.”

Of course, this is what we were told this week by Janet Yellen, and the Fed, as they finally lifted rates for the first time in 2016 with the expectation the economy will continue to perform “well,” the current rate is only modestly below the “neutral” rate, and the rate hike is a vote of confidence in the economy. Or course, the irony is when she stated the Fed is expecting to hike rates 3-times next year.  Considering their previous track record for lifting rates, it is astonishing the market continues to “buy” the nonsense.

fed-rate-projections-history

As I penned last weekend, the ramp up in the market against a backdrop of a “fear” of rising inflationary pressures, when none really exists, is a dangerous brew for the markets. With interest rates and the U.S. Dollar already heavily front running the Fed in the tightening of monetary policy, there is a very high risk of an “accident” occurring which takes investors by surprise.  

But for now it is the holiday season, so “hope” is much more “fun” than the politics of reality. Which reminds me, it is that special time of year to share “Festivus.”

Here is what I am reading this weekend.


Fed, Economy & More Trump


Markets


Interesting Reads


“Without action, the best intentions in the world are nothing more than that: intentions.” ― Jordan Belfort, The Wolf of Wall Street

Questions, comments, suggestions – please email me.


Lance Roberts

lance_sig

Lance Roberts is a Chief Portfolio Strategist/Economist for Clarity Financial. He is also the host of “The Lance Roberts Show” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter and Linked-In

2016/12/16
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