FRB Quarter Pointers Not Exactly Bell Ringers

After the FRB pronouncement on interest rates, I dug right down to the bottom of my shoes and felt nothing. Don’t you miss Alan Greenspan who changed interest rates during his tenure couple a dozen times?

From the pits I hear “OK wise guy, what would you have done?” Fair question, I woulda chopped interest rates 75 basis points. If it stirs up inflation, you can always restore half a point. Credit card purveyors are ready to raise rates on card holder debit balances and new card issuance. 

How do you play a FRB induced rally? I bought bank stocks like Morgan Stanley and added to an already overweight Goldman Sachs. You gotta assume deal proliferation and rising debit balances at banks from individual and corporate borrowing. Too early to worry about loan losses and making bad deals. 

I can’t give you a very good reason why I’m overweighted in prime growth stocks like Apple, Microsoft and Amazon as well as financials like Goldman Sachs and Morgan Stanley. At the least, the market won’t surge without such obvious growthies and financials leading the pack. They account for over 20% of the market’s capitalization. 

The energy sector, which acts sluggish, could face easing oil quotes and go nowhere. I’ve just covered half the market’s valuation. Stocks like Berkshire Hathaway, heavy in energy, could suffer. Stocks I can’t analyze, like Tesla, I avoid. Let it trade 50 million shares by lunchtime, but without me. 

The Fed at this time seems to have made itself into a neutral agent of change. Nothing exciting to come. With its quarter pointers it’s saying we aren’t your agent of radical departure, just a monitor of what unfolds. 

We’ve no edge in forecasting geopolitical forces at work except to mark down our price-earnings ratio for stocks to reflect world tension. To celebrate: 

Oh! That Shanghai

Don’t Betcha Money

On The Shanghai

Bet Your Money

On The Chicken in the Middle

Don’t Betcha Money

On the Shanghai

Expect more quarter point bumps in rates next 3 to 6 months. Nothing to make the market bubble over. But, big cap growthies like Apple, Microsoft, and Amazon can hold onto leadership. Financials like Goldman Sachs, and a few banks like Morgan Stanley should make the new high list. 

Ask yourself why our market should sell over 15 times earnings unless you see a sizable earnings story in the cards. It can’t just be growth stocks, alone. A bouncy market needs several major sectors working for you. General Motors and General Electric need to sing,  while there’s money for financials like JP Morgan and Goldman Sachs. Let them wax expensive. 

Berkshire Hathaway sits with huge positions in Apple and OXY.  In my scenario, oils float like dead paper. I assume upward commodity quotes don’t happen. 

The case for a fully valued market is easy to make. The price-earnings ratio for the S & P 500 holds at 20 times anticipated earnings, historically a formidable level. When numbers go wrong at 20 times earning, the market normally flops to 15 times earnings, a major disaster for investors. 

Who cares for investors these days? Nobody cares. The FRB never takes blame for forcing recessions. But, will fight inflation with gusto. That’s what it’s supposed to do. Right? 

No. Wrong. We want to see the Fed foster orderly economic growth, but going back 50 years it’s more disorderly. I miss the old fashioned stock ticker that jingled a bell when it was about to publish good news for stocks.