Notes From All Over -- December 15, 2021

Stock picking:

• UBS named UPS the "2022 top stock pick."

Investing: unless the Fed really, really surprises me, I am thrilled with "everything" investing. 

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The Fed's Announcement

Disclaimer: done on the fly; not spell-checked; there will be typographical and content errors. Facts and opinions are interspersed; hard to tell the difference.

2:01 announcement: regardless of how the analysts see it and/or how the market reacts today, this was an incredibly dovish announcement. Investing? I'm all in. 

2:05:

• Market reaction: none.
• moments later: Dow, which had been down, is now green, and solidly green
• Ten-year treasury: flat, at 1.475%. But CNBC anchor says TYT is surging, from 1.4whatever to 1.475%. But now, TYT is 1.460; now 1.467%.
• "Dots" yet to be posted.
• later: dots suggest -
• two or three rate hikes next year; 
• two the following year
  
• Fed decision: anonymous.

• San (Rick Santelli): sees Jay Powell reacting to a "stagflation" environment.
• San: says the market has it right 
• San: has the Fed just right with regard to tapering
  

• NASDAQ reaction will be the real signal:
• NASDAQ has gone from solidly negative to turning green.

• What am I going to look at? AAPL
• negative at the start of the day, has now turned green;
• negative at the start of the day, now up $2.26 
• by the close, profit taking but that initial surge was very, very important to see;
  

• I just turned on CNBC at the announcement:
• talking heads generally seem a bit flummoxed
• trying to talk down the market, but,
• Melissa suggests we saw the "bottom" in the market this morning, but prior to the announcement

Likely:

• asset rotation, from high-flying meme stocks to solid stocks actually reporting profits

For all the hype: a "nothing burger" -- first glance, yet, but the fact that this is so dovish, and the market responded as such, this was huge. 

Biggest problem the Fed has: the middle class can't take much more --

• Covid; high gasoline prices; house prices out of reach; hamburger doubling in price --
• can America's middle class actually handle higher interest rates. Wow. Think about that.

Next big question:

• is Fed only thinking about the dual mandate (inflation. job creation), or
• does the Fed have one eye on the equity market
• I don't think so. I don't think Jay Power is looking at the market when he makes his decision. At the end of the day, Jay Powell has an eye on the American middle class;

Steve Liesman saw the "silver bullet." 

• I'm impressed. He got it exactly right. I'll come back to that later. Bullish, bullish, bullish. Irony: Liesman is generally bearish, bearish, bearish. 
• The sentence that Liesman caught -- 
• The Fed will raise rates when the two targets are reached:
• inflation target has been reached, and was reached several months ago; that means the rates need to be increased, but ... 
• the second of two mandates, unemployment was not meant. Powell says "we" are not yet at full employment and he won't raise rates until we are at full employment
• Powell did not define "full employment"
• in round numbers, there are about 10 million unfilled jobs in the US. Tell me again we are not at full employment.
• current unemployment rate: 4.2%
  

Definition of "full employment."

Frederic Mishkin: former Fed governor -- 

• very critical of the current Fed; 
• how he reads the decision today; remains disappointed. 
• Says we already are at full employment
• calls this very expansionary (very dovish, in other words)

Tapering:

• The Fed is buying $120 billion in government backed bonds each month — $80 billion in Treasury debt and $40 billion in mortgage-backed securities. -- November 3, 2021. 
• The Fed has been dropping that $120 billion "buy" by $15 billion each month.
• Today, the Fed said they will double that taper, to buying $30 billion LESS each month
  $120 billion / $30 billion = four months. 
  

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Q&A

Definition of unemployment / full employment / maximum employment: a judgement call. Many factors go into defining maximum employment.

Rates: will not raise rates until tapering has concluded next March. Will not answer question: how long the hiatus between concluding the taper March, 2022) and the first fed rate.

In other words, no rate increase until at least 2Q22. Currently at a "zero-percent rate" it appears, a quarter-percent rise each quarter in CY22.

• 2Q22: 0.25%
• 3Q22: 0.50%
• 4Q22: 0.75%

While Q&A going on, TYT: 1.468%.

Market:

• tech is surging again
• NASDAQ after being down a couple hundred points today is now up 50 points
• PFE: up $2.87
• WTI moving up. 

Jay Powell:

• avuncular
• able to speak clearly to the average American
• not speaking from an ivory tower
• reminds me a lot of Louis Rukeyser and his panelists back in the late 1990s and early 2000s

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Melissa: 4:00 P.M.

Wow, Melissa thinks this was a hawkish announcement. 

Wow. 

Talk about misreading the event.