Don’t think about the Fed

The surest way to get anyone to think about elephants, the saying goes, is to sternly admonish them not to think about elephants. This week, all anyone in the markets is going to be thinking about is whether or not the Fed announce the start of a rate-rising campaign on Sept 17.

elephantCalculated Risk, a fine economics blog, thinks the Fed will pull the trigger this week, and provides a nice roundup of the evidence. The Wall Street Journal, meanwhile, notes this morning that rate hikes by other big central banks haven’t stuck. And, just to stir in a bit more uncertainty, the Federal Reserve Bank of Atlanta notes that the probability of deflation is no longer zero. 

But there are, honestly, other things going on in the world that could affect the stock market, and they’re useful to look at. For example, many people look at hedge funds as the pinnacle of money management skills. This may be true, but you have to overlook the funds’ horrific failure rate, says Larry Swedroe at ETF.com.

Approximately 30% of new hedge funds don’t make it past 36 months due to poor performance,” Swedroe writes. “Almost half of all hedge funds never reach their fifth anniversary. And only about 40% survive for seven years or longer.” And, while there’s some evidence that the very best hedge funds can stay hot for extended periods of time, good luck getting into one.

And then there’s China, the other elephant in the room. “We did analysis recently where we said, what if the Chinese economy is not growing at 7.5% or 8%, which is what they hope to do?,” bond manager Jeffrey Gundlach told ETF.com, “What if it’s growing at 2% or 0% instead? And we came to the conclusion that the global economic growth could very well be only 1 percent right now on an annualized basis. That’s an incredibly low rate of growth.”

And Russia. Moscow is apparently ferrying arms and soldiers to the aid of the Syrian government, flying over Iran and Iraq to do so. Other things to ponder, aside from elephants:

Did you get in on a big initial public offering this year? Why aren’t you smiling? Could it be because 40% of the $1 billion IPOs in the last 12 months are selling below their offering price?

Want to buy a new house? October is the best month.

The Bloomberg terminal, a fixture in trading rooms for three decades, is finding new competition.

Daily roundups that should be on your reading list: Barry Ritholtz’s The Big Picture, Josh Brown’s The Reformed Broker, Dealbreaker’s Opening Bell, Naked Capitalism’s links. The latter is where I found this gem: A Colorado Canyon is closed because too many people are taking selfies with bears. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s