E The Ghost Of The Feds Past: Rate Hikes, Rate Cuts, And The Great Collapse

According to Graves & Co., an industry consultant, oil and gas companies have laid off more than 250,000 workers around the world, a tally that will rise if oil prices remain in the dumps.

Conclusion: one could logically deduce that older individuals needing part time work to pad their savings for retirement are taking advantage of the holiday season and working as a Walmart Greeter (unfortunately this was temporary as today Walmart announced mass layoffs totaling around 16,000 employees and shutting down 269 stores). Same with Macy's which recently announced many store closures and large labor force cuts with it.
Through the Feds eyes - the economy is recovering so rapidly that individuals can now go to higher end stores instead of Walmart (WMT) and Macy's (M), taking away from cheap goods business. 

Point 2. "The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen," says Yellen. But what economic data is the Fed looking at? Because this author could not find anything remotely close to that bullish stance. In fact, the Atlanta Fed cut GDP expectations for the third time in a month, now at a poultry 0.6% for the 4th quarter. The weather will be blamed of course. Also the Chicago PMI "unexpectedly" dropped sharply, showing further business contraction.

The Chicago purchasing manager index unexpectedly plunged to 42.9 in December, its lowest reading since July 2009. Any reading below 50 signals a contraction in business activity.

And it gets worse - the ISM manufacturing index slipped down further again to its lowest since the 2008 recession. And things are only going to get worse. Investors should look for themselves:

Charts: Bloonberg

Conclusion: The Fed could not have picked a worse time to raise rates when the economy needed liquidity the most. When data was this bad before not only did the Fed cut rates to 0%, they included heavy doses of QE aswell.

Sidenote: Things are eerily similar to 1936 when the Fed thought the economy was healing after the Great Crash of 1929. To summarize - the Fed hiked rates in the winter of 1936 due to a somewhat recovering economy, and the following summer during 1937 the DOW started its collapse which would end up totaling -50%:

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This is a column I wrote in my recent newsletter issue.

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Joe Economy 4 years ago Member's comment

Even if Yellen did seem too overly optimistic about the state of the economy when she decided to raise interest rates, I still believe that whatever turbulence we are seeing now in the stock markets are not as a result solely of that rate hike. China was and still is extremely volatile, oil continues to spiral downwards, and the US dollar is stronger than almost any other currency which makes US exports expensive and pressures the US economy in a myriad of ways.

Adem Tumerkan 4 years ago Author's comment

I also dont think it is the sole reason either.

But mentioning China, they had a similar volatile and our markets also plunged in August, just as the crowd as positive the Fed would hike rates - then they didnt and markets rocketed.

The data is clear, we are in a recession.

Alot of the issues you just named are symptoms of a strong dollar in my opinion (or atleast the strong dollar added to the damage).

Currency Trader 4 years ago Member's comment

Agreed, well done.

Gary Anderson 4 years ago Contributor's comment

Amazing that.25 percent hike is destroying liquidity. Must be a pretty fragile financial system.