Fed Rate Increases/Bonds/Gold

Trader Scott’s Market Blog

January 13, 2017

As the folks who actually understand markets (this does not include PHD economists) know, the Fed follows it does not lead. There are pundits, etc. who are paid/waste a ton of money sitting around trying to decipher all things Federal Reserve. And it’s completely useless, because the Fed simply follows the market. From the September 2015 post, my belief was the Fed was/is about to embark on an extended interest rate raising cycle. That belief wasn’t from some brilliant deduction, but because, yep, the markets were already way ahead of the Fed. And rates into September 2015 were accelerating higher, reaching 5 1/2 year highs. Yet all of Wall Street was sitting around trying to decipher the Fed. Who cares? Rates on the short end were already surging. But just like December 2015 when, of course, the Fed raising rates was bearish for bonds and gold, they both bottomed right after the Fed meeting(s). So now the crowd once again is taking the Fed at its’ word, and believing there will be multiple interest rate increases this year. That’s what the Fed said after the previous rate increase, yet there was only one increase in 2016, and not until December. Rates, except for the very shortest, have dropped quite a bit since the meeting. I did a position trade in early December to take advantage of a drop in yields. And the drop in yields has been a big benefit to gold. Gold and the bond market are tightly correlated currently. That situation won’t always be in place, and the second half of the year it should unravel. Why believe a word the Fed says, just listen to the market. This year is not going to be nearly as ideal as the Donald Trump (whom I voted for) supporters believe it will be. The volatility this year and going forward will have a big effect on the grand plans of all the central banks of the world. Their oxymoronic negative interest rate scheme has been a total disaster. But they are brilliant PHDs, therefore genetically incapable of recognizing, much less admitting, when they’re wrong. The markets tell me when I’m wrong, but the central bankers have the luxury of “ignoring” the markets. Of course that only makes things worse down the road for those of us 99%ers, but why would central bankers care, as long as their Mega-Bank masters are happy. The secular bear market in bonds will slowly diminish the power of both the central bankers and the Mega-Banks, and it will be a joy to watch.

About

Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.

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