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New Fed Head to Lie to Us

Posted March 20, 2018

It is a bleak day here on Wall Street. It is cold, too. The wind blows, and the talk on the radio is of a late March snowstorm.

Yesterday, all the major indices were down. The Dow 30 was off by 437 points, and the Nasdaq was down 188.

It seems the market is concerned with some shenanigans at Facebook (NASDAQ: FB), which has dropped more than $40.  

CNNTech writes:

Facebook is facing an existential crisis.

The Cambridge Analytica scandal has done immense damage to the brand, sources across the company believe. It will now take a Herculean effort to restore public trust in Facebook's commitment to privacy and data protection, they said...

Aleksandr Kogan, a University of Cambridge professor, accessed the data of more than 50 million Facebook users simply by creating a survey filled out by 270,000 people. Facebook provided Kogan with the data of anyone who took the survey, as well as their friends' data. In a statement, Facebook said, "Kogan gained access to this information in a legitimate way and through the proper channels that governed all developers on Facebook at that time."

There is a “Delete Facebook” campaign, and it looks like government regulation may be in the cards. CEO Mark Zuckerberg hasn’t been heard from. Perhaps he put on a red sweatshirt and went into hiding.

As of this writing, gold is at $1,311 an ounce, and silver is at $16.15 an ounce. It seems as if gold has been at $1,300 and change forever. But no, it has only been since mid-2013.

That said, it is ticking higher and will likely break out to the upside in the next few months. If we can get above $1,390, it is off to the races.

The market is down because the Federal Reserve is going to raise interest rates tomorrow.  

That’s right, Fed Chair Jerome Powell will chair his first interest rate policy committee meeting on Tuesday and Wednesday.

After all the coffee has been put away and the Danishes devoured, the U.S. central bank will issue a rate decision, a policy statement, and an updated forecast on the economy.

This will happen at 2 p.m. Eastern on Wednesday. Our new Fed head will follow up with a press conference at 2:30 p.m. He will say they hiked rates a quarter percent, that they are watching the data and are concerned about inflation, and that they will raise rates if needed in June.

Gold will surge in the morning and sell off after the press conference. Stocks will sell off until the press conference and then gain into the close. That’s what seems to happen anyway.

To put rates into perspective, here is a 62-year chart. The grey lines are recessions.

You’ll notice that the Fed hikes rates and creates recessions. Then it cuts rates! That’s because if it can’t cut rates to make money cheaper, then it can’t save us from the recession it just created.

At the top, the federal funds rate was above 20%. Now it is at 1.75% — about as cheap as it has ever been. But it should keep going up one quarter-point hike at a time until it is at 2.5%–2.75% by the end of the year.

Stocks that will underperform are utilities, consumer goods, and real estate. The winners will be gold, silver, timber, cobalt, lithium, and rhodium, as well as financial, tech, and healthcare stocks.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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