Easy Money The Bull
There is a strange amount of taunting going on in financial media right now. Exhibit A: We Dare You To Try Raising Rates This Year. “The market is essentially calling the Fed’s bluff. Traders are betting that policy makers won’t be able to raise rates this year…’In the end, the Fed is more likely to ‘cave’ to the market as opposed to ‘fight it’ by hiking when the market does not have it priced in.’” Exhibit B: Fed Rate Move Will Make Doves Cry. “There are some investors…who don’t think any increase will happen this year. It is this last group — who are likely enamored of sectors paying big dividends, such as utilities and master limited partnerships — the Fed has to worry about…If the Fed does raise rates in September, these folks are going to be surprised — and inflict a few shocks of their own on vulnerable sectors.” But wait…what if it’s all going to be fine you guys? “Think about it: bond yields have spiked over the past two weeks…The stock market, however, hasn’t really been hurt that much as this has been going on.” And “the more people see examples of rising yields and a fairly stable stock market, the more this ‘it’s going to be OK’ idea slips into daily conversations at steakhouses, by water coolers, and at lunches with clients.” Meanwhile, Jesse Livermore (of blogging/Twitter fame, not, like, real life Jesse Livermore fame…that would be weird because real life JL is really dead) has significantly changed his tone on profit margins and I highly recommend reading this entire post but here’s the key point: “dramatic technological changes of the last 20 years have made credible competition in certain key sectors of our economy more difficult, and have allowed dominant [companies] to command sustainably higher profit margins.” He argues that barriers to competition are most pronounced “where the dominant players have pricing power,” e.g. finance, technology and health care. In conclusion, the undead Livermore thinks “bearishly inclined investors should seriously consider the possibility that the ‘mean-reversion’ that they’ve been patiently waiting for is not going to happen, at least not to the extent expected.” Meanwhile CHECK OUT THE GROWTH.
ps. doesn’t really jive with “CHECK OUT THE GROWTH”