Don’t Expect a Normal Reaction to an Abnormal Situation – Video Blog

* On Friday we finally got the Non-Farm Payroll numbers for July

* The consensus is that this reports indicates that an interest rate hike is inevitable

* This is the rate hike that everybody has been expecting and this report see

* The report is weak, relative to previous months, but slightly ahead of the consensus

* It seems like we are going in the wrong direction

* Labor Force Participation Rate is stagnant at the lowest in decades

* Q2 GDP was much lower than expected

* the Atlanta GDP Now Forecast for Q3 at 1% - a third of the official forecast

* If the Fed was not willing to raise rates last year, when the economy grew at 5%, why would they raise rates now?

* The Fed may have backed themselves into a corner where they have to raise rates

* If so, Yellen has already prepared the market for a tiny raise

* They recognize that the market is fragile

* It would be a more credible move for the Fed to not raise rates at all

* The market's reaction to the jobs data and the "certainty" that rates are going up

* The dollar sold off somewhat

* Gold rose slightly

* Higher interest rages are expected to be bullish for the dollar - Why didn't the dollar rise?

* The old adage, "Buy on the rumor, sell on the fact"

* If the Fed raises rates in September, it will be the most highly anticipated rate hike ever

* If the market buys on the anticipation of a rate hike, the actual rate hike will be the sell signal

* The market is telling us it has gained all that it is going to gain from any future rate hike

* The Fed will deliver much less in the way of rate hike than the market expects

* The reaction in the stock market was more interesting - The market was down again

* The longest losing streak in the Dow in about 4 years

* The fact that the U.S stock market is still falling indicates whereas the currency markets may have factored in a rate hike, the equity markets have not

* I have been hearing the refrain,"There is no reason to fear a rate hike!"

* This is a very naive to look at the market because there is no historical precedent for interest rates to stay low for so long

* These are not "normal" times

* More importantly, the market only expects a rate hike if the economy get better

* But now the data shows that the economy is continuing to slow down

* The crowd that believes a rate hike will not harm the economy should reassess their thinking

* Corporate earnings, already under pressure will be further weakened by an interest rate hike

* The consumer is barely surviving with rates at zero

* 2015 is probably going to be the weakest year of the entire so-called recovery

* If the Fed really begins to raise interest rates, what is going to happen in 2016?

* We will be in a bear market, the real estate market will drop and a recession will follow

* The Fed's only medicine at that point will be QE

* The truth is, the economy did not need the first round of QE and it nees QE4 even less

* This is going to be the mother of all money drops and all the people who have been saying,"The Fed was right!" are taking a premature victory lap

* Hopefully it will shock the Keynesians into abandoning central banking and central planning

* And finally embracing a real market recovery based on free market principles

* Those of us who have seen the writing on the wall will be rewarded in the investment front

* For having the fortitude to maintain our positions and not throw in a winning hand


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