Fed 'tapering' rumor, Nikkei, gold to roil Monday markets

Despite talking head happy talk, this market is dangerous. Photo: AP Photo/Seth Wenig, file

WASHINGTON, May 13, 2013 – Even some amateur investors are starting to get nervous at the market’s record climb in 2013. When you start to hear “this time, it’s different” from some media chatterboxes, it’s not a good sign. U.S. markets are showing signs of weakness, and if the HFTs get too many whiffs of this, they’re likely to start bailing big time. Problem is, this market’s pretty nervous, particularly given hints from the Fed last week that their QE bond-buying party might be on the verge of some “tapering.”

“Tapering.” Now there’s a nifty example of Washingtonspeak, a new coinage that doesn’t say “interest rate increase” except that it does. This momentarily spooked markets badly when it leaked out on Thursday. Monday’s markets might get roiled again because the Fed’s favorite Wall Street Journalist-rumor dropper reiterated this speculation on a bullish Friday afternoon. After the close, of course. This kind of policy choreography needs to be closely watched by optimistic investors. For more details, check out this piece in ZeroHedge.

SEE RELATED: U.S. markets set to rebound, gold set for stunning bounce

Just to make things more complicated, on the optimistic side of the ledger, Japan’s stock market jumped Monday after global finance leaders gave a seal of approval to the country’s stimulus program and refrained from criticizing its weakening effect on the yen. Stocks were mixed elsewhere in Asia.

The benchmark Nikkei 225 index in Tokyo shot up 1.6 percent to 14,838.08. The index has soared nearly 43 percent since the beginning of the year.

Finance leaders from the world’s seven leading industrialized economies said at a meeting over the weekend in Britain that Japan’s stimulus policies are aimed at boosting the domestic economy, which has been mired in stagnation since the 1990s, and not manipulating the yen.

Prime Minister Shinzo Abe, elected late last year on promises to revive the world’s third-largest economy, has implemented a policy mix of increased public spending and aggressive monetary easing.

SEE RELATED: Gold bugs busted decisively, massive panic selling ensues

One result has been a dramatic fall in the value of the yen, which helps the country’s export industries by making products more affordable in overseas markets while increasing the value of repatriated profits. On Thursday, the dollar rose above 100 yen for the first time in more than four years.

BTW, lest we forget about everybody’s favorite metal, gold fell along with other commodities on Friday as the U.S. dollar continued to appreciate against the yen and other currencies. When the dollar rises against other currencies, it tends to weaken demand for commodities, hurting resource-related shares.

The news is a mess and we continue to remain cautious. Our stance has likely cost us some profits. But we’ve been in many a market where one fine day the bottom dropped out of a stock rally. We have no desire to remain overexposed.

No particular suggestions today. Since it’s options expiration week, the traditional stance is generally bullish. But people are just too optimistic, leading us to fear that Mr. Market is about to teach us all another harsh lesson.

SEE RELATED: Sequestration, Euro jitters, gold down: Futures up?

And after all, it is the month of May. Last week, everyone was telling us, once again, that “this time is different,” too. We’re not so sure.

     —AP contributed to this report

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  



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