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Friday, October 17, 2014

THE MARKET'S UP: here's the real reason, which you'll never get from Ritholtz or Josh Brown or Joey the Weasel


The market is not up because of a dovish Fed. Here's why:

1. the Fed was always going to monitor economic conditions to determine the best time to begin normalizing rates; and

2. US economic conditions are great.


And if the market were up because of dovish comments from the Fed, that would be silly because:

1. the market was scared of Ebola, even though the disease is mostly affecting countries that have no economy and the Fed can't do anything about it;

2. the market was scared of a Eurozone deflationary spiral, even though that was already happening months ago and will continue to happen despite anything the Fed does;

3. the market was scared of a China slowdown, which will continue despite anything the Fed does and which has been happening for a year anyway not like you'd see any hint of it in the Shanghai Composite Index;

4. the market was scared of a bunch of other silly shit too which didn't magically disappear yesterday either.


So why is the market up?

Because the market was down, and it was down because the bid side of the book had disappeared, and you can tell because even guaranteed home run stocks like Magna and Union Pacific were getting puked at the end, and of course the bid side had disappeared because the market had decided now was a good time for a correction.

But the market was still waiting to jump back in at the end of this correction, and it was desperate for any reason at all. Because the market knows that:

1. the US is in a secular bull market;

2. recent economic data has been great and there is no hint of trouble;

3. Nothing has changed in Europe or China or Sierra Leone in the past month;

4. And yet $VIX was as high as it was for the Fukushima earthquake and tsunami and nuclear plant meltdown.


And so of course the market was going to move up on a dime.


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