Central Banks, “Spend money, or Buy stocks”

Central Banks, “Spend money, or Buy stocks”

Central Banks, “Spend money, or Buy stocks”


Last week, Former President of the Federal Reserve Bank of Dallas, Richard Fisher, offered this alert advice, to investors and consumers, “I would be prepared when they move — and I hope they move sometime in June — there’ll be a settling in of the market place. There will be a correction. Suck it up. Deal with it. That’s reality.”

ECB President Mario Draghi said that negative rates are “not the problem, but a symptom of an underlying problem” caused by a “global excess of savings. If central banks did not do this, investing would be unattractive.”

What the central bankers want consumers and investors to do is either:

  1. Spend money to increase demand, or
  2. Buy stocks to increase capital.

The American consumers are not spending money.

The US economy is consumer driven, as consumer spending makes up 70% of the US GDP. The latest data shows that retail sales fell over Q-1 of Y 2016.

The US restaurant barometer tells us that the macro environment for casual dining had a rough Quarter and a rough couple of Quarters. And that the US consumer is not spending money in this environment.

And if the US Census Bureau right, the US economy is headed for a recession. Every time the yearly growth rate of retail sales has fallen below 3%, the US economy has gone into recession.

Next: An SEC regulatory change that could “knock off” the stock market

The US Securities and Exchange Commission (SEC) has decided to put an end to the aggressive accounting that artificially inflates profits.

Now, the Commission is going to examine companies’ “homegrown earnings measures” and target firms that “inflate their sales results and employ customized metrics that stray too far from accounting rules.”

The SEC is launching a campaign to crack down on made-to-order earnings.

To see the impact of such a crackdown, all you have to do is take a look at the growing difference between GAAP profits and pro forma profits.


All of the above says to me, Caution,  hang on, Warning: Bear Market ahead.

The new SEC scrutiny could be just the thing that knocks this long in the tooth Bull Market off its hooves.

Monday’s major US stock market indexes finished at: DJIA +129.71 at 17804.87, NAS Comp +36.88 at 4837.22, S&P 500 +12.03 at 2083.25

Volume: Trade was below average with about 883-M/shares exchanged on the NYSE

  • NAS Comp -3.4% YTD
  • S&P 500 +1.9% YTD
  • Russell 2000 +1.9% YTD
  • DJIA +2.2% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (0.21) Neutral (-0.14) Bullish (0.40) Bullish (0.38)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.05) Neutral (-0.02) Neutral (-0.10) Bullish (0.29)
HeffX-LTN Analysis for QQQ:  Overall Short Intermediate Long
Neutral (-0.03) Neutral (0.04) Neutral (-0.10) Neutral (-0.03)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.23) Neutral (-0.11) Bearish (-0.38) Neutral (-0.21)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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