Apr 01/15 – Introducing the Federal Reserve Dash Button
2015-04-01 9am EDT | #Dash Button #Federal Reserve #stocks
I am sure most of you will have heard about Amazon’s new Dash Button product. If you haven’t, it is a small electronic device about the size of a pack of gum. When you press the button, Amazon automatically orders whatever product you are about to run out of. So far Amazon has 258 products on offer.
But you might have missed a small partnership announcement that Amazon buried in the press release. The Federal Reserve has teamed with Amazon to create the Federal Reserve Dash Button. It provides Primary Dealers with a crucial mechanism for getting instant bond bids from the Federal Reserve. From the press release:
Place it. Press it. Get it.
Federal Reserve Dash Button comes with a reusable adhesive and a hook so you can hang, stick, or place it right where you need it. Keep Dash Button handy on the trading floor, the bar in your building, or anywhere you might feel the need to hit a bid. When you’re running full of inventory, simply press Dash Button, and the Fed quickly delivers over inflated bids so you can skip the year end bonus disappointment.
It’s nice to see the Federal Reserve using technology to make it as easy possible for the Wall Street fat cats to get even fatter.
Some squirrelly action
Yesterday was quarter end, so I was anticipating some volatility. We did get some selling action into the close, but it was the overnight session that was really squirrelly.
Last night the S&P 500 futures were down 25 handles on no news.
This sort of volatility is an ominous development. I have long held the belief that the stock market has been goosed higher by foreign Central Banks monetizing their balance sheet. Of course CEOs leveraging up their companies with debt funded equity buy backs hasn’t hurt. I am skeptical that the stock market is anything but an overpriced disaster waiting to happen. When the bids from the Central Banks and the buy backs slow down, all these investors that have ventured out the risk curve because “there was no alternative” will get shaken off. And it is going be u…g…l…y…
The point I want to emphasize is that stocks are up on non-natural buying. Although many pundits have tried to convince the public that stocks are “good value,” they are more momentum chasing monkeys than value investors. I will not bother going through all the over priced valuation metrics again – we all know that stocks are priced for perfection.
Stocks need lots of buying to continue going up. Even a slowing down of that buying can be enough for a big correction to occur.
It was only a month ago that my Twitter feed was filled with bulls making fun of anyone who even hinted that stocks might go down. Yet here we are with the first quarter in the history books and stocks are basically at the same place they started the year.
Investors have been lulled into a sense of complacency regarding the continued stock market rise. It is easy to understand how we have reached this point as the gains have been steady and easy.
There has been no point in overthinking it. Any attempt to caution that stocks also sometimes go down has only made you look like a fool.
But the first stage of the eventual correction is for the market to stop going up. We have finally gotten that. There has now been three months of the market treading water. Even though the markets are no longer rising, there is still a fair amount of bullishness. Investors have forgotten that stocks can decline. Don’t make the mistake of assuming the future has to look like the past. The relentless rise of the recent past is not natural, and more importantly, it is unsustainable. Don’t assume that the bids will always be there.
We have seen the first hints of what will happen when these bids disappear. Last night was a sickening whoosh lower on no news. One day that decline will just be the start instead of yet another dip to buy…
Thanks for reading,