Thursday, June 27, 2013

Stock Market: Bad Feral Hog Day

(Drivebycuriosity) - Today was a bad day for the "feral hogs". Federal Reserve member Richard Fisher (Dallas Fed President) described this species as " big money" that "does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they go after it." 
Those feral hogs had set huge bets on falling stock prices because the Federal Reserve Bank announced last week that their huge stimulus program QE3 will be reduced gradually and could end around the middle of next year (tapering).

Today´s news also was a setback for the doom & gloom fraction (Roubini, Faber, many short selling hedge funds, media) who sees the next recession & stock market crash around the corner. This morning we learned that U.S. consumer spending rose in May 0.3% and income advanced 0.5% (reuters). We also heard that pending homes sales (contracts to purchase previously owned U.S. homes) climbed 6.7% to the highest level since December 2006. And the weekly jobless claims continued their downward trend last week. 

The new data confirm that the US consumers don´t care about feral hogs, stock sales of hedge funds and the gloomy sentiment in the media. The solid consumer spending is still the engine of economic upswing. Rising incomes, gains on the stock and the home market should fuel further advance of the economy.

The data also justify the tapering announcement. The U.S. economy needs the stimulus program less and less. The tapering should avoid overheating and rising inflation and hence contain the rise of the interest rates.

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