FOMC Accomodates

Perhaps you remember the financial crisis of 2008. It was a presidential election year. The powers that be seemed to want Barack Obama elected — even if it meant taking down the economy to assure the desired result. We heard rumblings as the Fed cut interest rates aggressively through the end of 2007. This time, we have had a persistent “liquidity crisis” in the repo space starting last fall and persisting into 2020. Back in 1Q08, Countrywide and Bear Sterns had to be bailed out. This time, we had a mini meltdown blamed on the Wuhan Flu with the Fed bailing out just about everyone.

As the election neared in the fall, the U.S. Treasury bailed out Fannie Mae and Freddy Mac. Lehman Brothers went bankrupt while Merrill Lynch and Washington Mutual were taken over by banks to rescue them. Congress kept voting until they got the result that the powers that be wanted and approved the TARP bailout bill just one month before the election.

Will it be that the next big economic shoe will drop this coming September and October? The pattern between 2008 and today is too similar. This is especially true since the Wuhan Flu hysteria is primarily caused by power brokers whipping the public into a frenzy over a hoax.

Monday, stocks gained 1.8% in Asia and Europe and 2.2% in the U.S. on very high volume. The VXO fell 10% to close at 33.48. The 10-Year U.S. Treasury bond yield shot up 10% to close at 0.66. The Dow and NYSE closed above their 24,000 and 11,000 benchmarks respectively.

Tuesday, stocks rose 1.6% in Europe and 0.5% in Asia and the U.S. on extremely high volume. The 10-Year U.S. Treasury bond yield declined 7% to close at 0.61. Wednesday, stocks moved up 0.8% in Asia, 1.6% in Europe, and 2.6% in the U.S. on massive volume. The 10-Year U.S. Treasury bond yield gained 2% to close at 0.63. The S&P 500 index closed above 2900 while Apple closed well above its 280 benchmark. The FOMC statement came out continuing the “whatever it takes” rhetoric with little substance.

Thursday, stocks in Asia gained 0.7% but in Europe fell 2.2% and in the U.S. fell 2.1% on massive volume. The VXO moved up 6% to close at 32.80. Precious metals fell 1% while their miners lost about five times that amount. Apple closed above its 290 mark.

Friday, stocks fell 2.0% in Asia, 0.8% in Europe, and 2.6% in the U.S. very high volume. The VXO shot up 16% to close at 38.12. The 10-Year U.S. Treasury bond yield rose 3% to close at 0.64. Precious metals miners gained about 3%. The Dow and S&P 500 closed below their respective 24,000 and 2900 benchmarks. Apple ended the week below its 290 benchmark.

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