VFTWS
The Fed Part Trois
In this post, we ask and answer a few more questions:
GG: First, you’re a marketing/branding specialist, so why are you writing these posts about the Fed, markets and the economy?
GG: I spent many years in senior marketing positions in the US derivatives markets; taught and wrote about options; learned about trading them; and have used them extensively. Today I trade often.
GG: Have recent actions by the Japanese enabled the Chinese to devalue their currency?
GG: It has enabled that to happen, even thought we expect that actions will be invariably taken.
GG: Has it provided cover for The Fed?
GG: Yes. And that may help the equity market and modify dollar strength. But it doesn’t help the economy per se.
GG: Why do markets globally rely so much on Central Banks?
GG: This is due to the failure in many countries to reform their laws governing taxes; economic structure; regulations; i.e. economic reform. We’ll start to tackle this subject in subsequent posts. Fundamentally Central Banks have had to do far more to attempt to keep economies on track to make up for significant failures of governments to govern appropriately.
GG: Are you worried about the economy?
GG: Yep. But growth in the US to the degree we have it will be very modest.
GG: And global growth?
GG: What global growth? We’ll have it in some countries but it will be spotty.
GG: And oil?
GG: $64 Billion question. A week ago I thought it could get down to a hair below $20 then gradually return to about where we are today. $30 oil is basically unprofitable for everyone except the Saudis and they are running a massive deficit. So, it will turn, but I am not sure when. While I am not currently selling the oils I own, I am not adding risk
GG: Where are you adding risk?
GG: Biotechs have been beaten up. There are great, large, profitable companies that look attractive. GILD (Gilead) has a PE of 7.5 the last I looked. Yes, pricing will be focused on and pressured due to the Democratic primary. But some equity prices represent opportunities.
GG: Where else?
GG: AAPL (Apple). Sentiment flows have pushed it down. It will come back. After a life in marketing, I know that everyone believes they’re an advertising expert. The same dynamic occurs for analyzing and opining about Apple. There are times when I will step away and not trade due to sentiment.
In the case of Apple, at times you have to stop thinking about what you think and think about what others think. And what actions they’ll take. Nowadays, it’s sell.
Ultimately that will change based on reality.