FRIDAY 9/12/14; DRI; EU and US Impose New Russia Sanctions; Retail Sales; Consumer Sentiment; Business Inventories

The dollar/yen continues climbing at six-year highs at 107.39; a phenomenal level since the dollar/yen had a 101 handle only a few weeks ago. The weaker yen sends the NIKK up +0.3% overnight. Softbank is up +2.3% benefiting from the ongoing Alibaba hype. China’s SSEC jumps +0.9% after the government’s fudged numbers show banks are loaning at the expected pace. Chinese auto manufacturer stocks rise despite softening car sales. Hong Kong regulators are investigating investment banking company CITIC so the stock drops -4% and drags the HSI -0.3% lower.

Aussie banks are weak taking the SPASX200 -0.3% lower. Aussie dollar 0.9053. The KOSPI gains +0.4% tugged to and fro each day by auto and electronics exporters Kia Motors, Hyundai Motor a





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ovish stance. Two lines in the Fed statement are key next week; the line about a “considerable” time before the first rate hike occurs (current projections are next summer) and the “slack in the labor market” diatribe.

If Yellen replaces the considerable word with a more hawkish word, the projections for the first rate hike would move forward to spring time and the Treasury yields would be expected to move higher right away in response. This explains the buoyancy in rates this week. It is very hard to believe, however, that the Queen of the Doves will modify the Fed language. The inflationists and those looking for higher Treasury rates immediately here on out will likely be disappointed and left at the altar once again come Wednesday.

HSBC agrees to pay $550 million in fines to settle litigation with the FHFA over the Fannie Mae and Freddie Mac mortgage fraud in 2007-2008. HSBC trades +0.5% as the fines are meaningless to the huge cash-cow investment banks while FNMA and FMCC both trade nearly -3% lower.

The stock market weakness today is met with a yawn. Traders remain bullish continuing to recommend buying stocks and indexes on the long side. The CPC and CPCE put/call ratios remain subdued despite the sell off (traders are not buying put protection) so there is no concern over a market pullback. The VIX pokes above 14 but settles at 13.31 remaining calm reflecting the ongoing market complacency. Piper Jaffray’s strategist Craig Johnson, who correctly predicted SPX 2000, remains super confident and optimistic that SPX 2350 is destined to print in the months ahead. Business Insider’s Joe Weisenthal announces the ‘humiliation of the Fed haters’. Weisenthal berates the market bears saying that the Weimar inflation worries have not occurred and the dollar has not turned into toilet paper as the Fed haters predicted. Schwab’s strategist Liz Ann Sonders says the markets remain in a secular bull.

Television personality Ben Stein urges viewers to buy the SPY as it prints above 200. The future is so bright you have to wear shades; rose-colored shades. Virtually no one, nada, expects a downturn in the stock market that will last a few months or year or two. Those that do call for a pullback of perhaps a few weeks duration say the secular bull market remains in place and any selling is a buying opportunity. The Fed and other central banker money printing has transformed traders into Pavlov’s dogs. The boat is fully loaded on the starboard side with bulls partying like its 1999 without a care in the world while the port side of the boat where the bears hang out displays empty deck chairs. The bears are on the starboard side sipping Fed wine with the bulls everyone buying stocks with reckless abandon staggering around and singing songs.