September 13, 2015 It's Time

Risk/Reward Vol.275

THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.

I am enjoying the last gasps of summer too much to compose a full blown edition. That said, the Federal Reserve meeting scheduled for next week is too important to go without comment.

Two weeks ago, I reported that I had re-entered ahead of the September Fed meeting in order to take advantage of what I viewed as an excellent buying opportunity. I also stated that if stability returned to the market I would buy more. Well, stability did not return, and the buying opportunity proved to be less than excellent. That said, I have not approached a sell point on any position, and all tolled the positions I bought are down less than 1.5 %. I don't consider this bad considering that much of what I bought is in the oil patch (RDS-S, BP, KMI and ETP) which continues to be hammered.

So why the volatility? Oh, we can mention China or domestic gdp growth or emerging market risk, but all of these are inconsequential when compared to the uncertainty surrounding what the Fed will do. As the market closed on Friday, bond futures put the odds at 23% that the Fed will raise rates next week. These odds are too low. Unemployment has fallen to nearly 5%, and the most recent economic data indicates that gdp growth is currently at 3+%. Admittedly, inflation is well below the Fed's target of 2%, but I see nothing between now and the end of the year that will cause that to increase. Don't forget that very early in 2015, Janet Yellen stated that absent a significant reversal in direction, rates would be raised sometime in 2015. Directionally, the economy has continued to improve, She missed her best opportunity to raise rates in June. Her next best time is now. I look for the Fed to take a baby step. Instead of implementing a 25 basis point increase (which is a typical move), I see a 15 bp (0.15%) bump and a clear signal that it is a "one and done" until sometime in 2016.

For goodness sake, Janet, get this done. My favorite quote this week is from the Financial Times: "Once again the fate of the global economy rests on the judgment of a few individuals without reliable economic models to guide them."