Saturday, November 21, 2015

The Importance Of Finding & Holding Winners In A Stock Portfolio

Blackstar Funds put together a study on all U.S. common stocks traded on the NYSE, AMEX and NASDAQ from 1983 to 2007. When looking at the total lifetime return for stocks over this period:

- 1 out of every 5 was a significant loser
- 39% of stocks had negative lifetime returns
- 61% of stocks had positive returns
- 1 out of every 5 was a significant winner

The average (mean) compounded annual return was negative 1.06%.

75% of the stocks in the data set collectively provided a 0% return, while the top 25% of stocks provided for all the gains. 

This emphasizes the importance of holding these crucial winners in your stock portfolio (as no one can know every winner or loser in advance due to competition and rapidly changing market dynamics, it emphasizes the importance of diversification).

I'll note this data set starts and the bottom and concludes at the top of one of the greatest bull market runs in history (1983 to 2007). If the data set were to be extended into early 2009 the results would be far more negative.

Saturday, November 14, 2015

Stanley Druckenmiller: Here's How The Fed Bubble Will End

The Fed Has Been Tightening Monetary Policy For 19 Months

Nearly 92% of economists surveyed this week by the Wall Street Journal expect that our eight-year experiment with unprecedented monetary easing from the Federal Reserve will come to an end at the next Fed meeting in December. Since we have had the monetary wind at our back for so many years, at least a few have begun to question our ability to make economic and financial gains against actual headwinds. But in reality, the tightening cycle that the forecasters are waiting for actually started last year. Sadly, the markets and the economy are already showing an inability to handle it.

While it’s true that we have yet to achieve “lift-off” from zero percent interest rates, rates have not been the only means by which the Fed has provided stimulus. We also have to account for the effects of Quantitative Easing (QE) and forward guidance of the Fed. Changes in those inputs over the past year have already created conditions of monetary tightening.
QE has been the process by which the central bank expands its balance sheet (otherwise known as printing money) to buy government and asset-backed bonds on the longer end of the duration spectrum. In so doing, it is able to help hold down long-term interest rates, a result that it would be difficult to achieve by changes in the federal funds rate. Zero percent interest rates represent a loose monetary policy, but once at the zero lower bound, QE is the way the bank eases even further.

Another big input is Fed “forward guidance.” This comes in the form of official and unofficial pronouncements from top Fed policy makers as to the possible trajectory of rates in the future. If the Fed communicates that rates will stay low, or QE will remain in place, for some time, then policy becomes looser still. Such assurances effectively remove near term interest rate risk, which stimulates financial activity. Ever since the Financial Crisis of 2008, the Fed has engaged in unprecedented forward guidance, without which monetary conditions could have been expected to be tighter.

To account for these important factors, University of Chicago professors Cynthia Wu and Fan Dora Xia, constructed a model for the “Shadow Rate.” While the fed funds rate has remained between 0.0% and 0.25% ever since November of 2008 (Federal Reserve Board), the Shadow Rate moved much lower, factoring in the effects of QE and forward guidance. That rate got as low as -2.99% in May of 2014. (Federal Reserve Bank of Atlanta, CQER, Shadow Rate)

But the Fed’s QE tapering campaign, which gradually reduced the amount of securities purchased monthly by the Fed, effectively began a campaign of monetary tightening that helped push up the Shadow Rate sharply even as the fed funds rate itself did not budge. After QE was officially wound down in October 2014, the Fed began to change its forward guidance to actively suggest that a long-term campaign to lift interest rates would begin in 2015. This also worked to help tighten monetary conditions. As a result, the Shadow Rate moved up from -2.99% in May of 2014 to just -.74% in September of 2015, (FRB Atlanta, CQER, Shadow Rate) an increase of 225 basis points in just over a year.

This is a fairly robust tightening trajectory that can be said to have clearly taken a toll. Since January of this year, the major market index, the S&P 500, has essentially been flat. While in contrast, it had been up by double-digits in five of the last six calendar years. Similarly, GDP growth has slowed considerably in the months since the QE program was finally tapered down to zero in October of 2014.

U.S. stock investors may be complacent regarding the ability of the stock market to withstand higher interest rates. Their confidence may come from the fact that, historically, markets have not peaked until 12-24 months after the Fed begins to tighten. This assumes the tightening cycle begins with the first official rate hike. But if it really began with the increase in the Shadow Rate, then a December rate hike will already be 19 months into the tightening cycle! Plus, given how overvalued stocks may currently be, and the amount of corporate debt accumulated to finance share buybacks, this bull market may be far more vulnerable than most to higher interest rates.

The last three times that the Fed had conducted a rate tightening cycle (1986-1989, 1994-2000 and 2004-2006), the increases in rates averaged 388 basis points. But those moves upward occurred when QE did not exist and when forward guidance was hardly a factor (the Fed only started doing press conferences in the last few years). So the tightening that has occurred to the Shadow Rate in the last year is already 58% of the size of the average of the last three tightening cycles.

Created by Euro Pacific Capital with Data from Bloomberg

If the Fed does as it has suggested it will, and takes fed funds up to 2.6% by the end of 2017 (which is the Fed’s own median forecast), then the total effective move (that includes the tightening of the Shadow Rate) would be a tightening of 559 basis points, well larger than the average of the last three tightening cycles. Does anyone really believe that our fragile and slowing economy can deal with that kind of headwind?

Generally, the Fed tends to wait until the economy is on solid footing before tightening. For instance, in the 12 months prior to the 390 basis point tightening that occurred between 1986-1989, real GDP was 3.2%. GDP was 2.65% in 1993, the year before a six-year tightening cycle raised rates by 350 basis points. GDP was a solid 4.3% in 2003, the year before Alan Greenspan began raising rates in 2004, a move that took up fed funds by 425 basis points. But current GDP, which is somewhere around 2.0% over the past four quarters, is not nearly as robust. (Bureau of Economic Analysis)

But what’s more concerning is the magnitude of the easing cycle that has gotten us to this point. It began in 2007, lasted a full 80 months, and took the effective fed funds rate (accounting for the Shadow Rate) down by 825 basis points. In contrast, the prior two easing cycles averaged 612 basis points and 34.5 months. This huge dose of stimulus is certain to have caused distortions in the economy that won’t be seen until we get more normalized levels of monetary policy. As Warren Buffet has most famously quipped, “We have to wait till the tide goes out before we see who has been swimming without bathing suits.”

Since the Second World War, recessions have begun, on average, every seven years. Since the current recovery is already seven years old, how much longer should we expect this historically anemic recovery to last? If the slowdown occurs next year, can we really expect the Fed to remain on the sidelines and risk the possibility that the economy goes into a recession leading into a presidential election? Both the chairperson and vice chairman of the Fed are solidly associated with the left side of the political spectrum. Should we expect that they would be hesitant to support the markets and the economy and thereby create conditions that might help Republicans take the White House?

Nevertheless, most people assume that rates are on the way up to 2% or more. But from my perspective it’s much more likely that the rates never get close to that level. I would argue that any positive rate of interest would be enough to stop this economy cold. Years of negative rates have so corrupted our economy that I believe it is now fully addicted and cannot survive under any other condition.

Since this historically weak recovery is already decelerating, one might expect the removal of stimulus could cause the next recession to start quicker and be far deeper than any experienced in the past. Since the Fed may recognize this, the next easing cycle could likely start much sooner, and the accompanying monetary stimulus be much larger than just about anyone believes.

Each of the last three easing cycles took rates lower than where they were at the end of the prior easing cycle. Given that the fed funds rate is at zero (and the Shadow Rate got to as low as -2.99%), one shudders to think how low the Fed is prepared to go the next time around. As a result, investors may want to consider re-positioning their assets for another period of possible monetary easing not a period of tightening, which I believe, in fact, is already well underway and will soon be a thing of the past. December is far less significant than what almost everyone has been led to believe.

Carl Icahn Interview - 2015 Dealbook Conference

Monday, November 2, 2015

Portugal Removes Democracy Creating Modern Day Brezhnev Doctrine

There was a landmark event last month in Portugal that was essentially ignored by the mainstream media. A new official was elected by the voting majority, but the current president overturned the ruling. From The Telegraph:

"Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.
Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.
He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.
Democracy must take second place to the higher imperative of euro rules and membership."
Nigel Farage lashed out against the ruling this week, comparing it to actions taken by the Soviet Union during the implementation of the Brezhnev Doctrine:

This is only a warm up. During the next financial crisis you will see unprecedented action taken by current government officials around the world to try and keep control of their power.

Tuesday, October 27, 2015

Million Dollar Shack: Why Real Estate Prices Will Collapse In Southern California

The following video is a treasure because it provides real life look into the housing bubble brewing in Southern California through the eyes of a "normal" middle class family in that area. They have been priced out of the housing market and, like many families living in the area, they are watching prices runaway to the upside while they try and save for a down payment.

The video shows tour buses filled with wealthy Chinese investors looking to deploy excess cash in American real estate. Most do not remember, but this exact same process occurred in the late 1980's when Japanese investors flooded the American real estate market with their excess capital. Their economy experienced a tremendous asset boom during the 1980's and money was flooding into America driving real estate prices higher. There was a fear at the time the Japanese were going to purchase "everything" in America and essentially take over the country.

The Japanese asset bubbles burst in the early 1990's and the buyers of American real estate quickly became sellers which helped create the savings and loan crisis that struck American banks in 1991. Once hot properties were bundled and sold to investors at a fraction of their late 1980's prices (both residential and commercial).

The echo bubble today is following the exact same process. China has experienced a real estate price surge over the last 10 years due to a government sponsored debt fueled mania. To help put the magnitude of their debt growth into perspective think about this: The entire U.S. banking system is $15 trillion in size. China has increased the size of their banking system debt from $10 trillion in 2007 to over $25 trillion today. That means they have added a debt mountain equal to the size of the entire U.S. banking system in just 8 years to an economy that is almost 40% smaller than the United States in terms of GDP. Almost all of this money has found its way into the Chinese real estate markets causing prices to explode higher. Excess capital from wealthy developers and real estate investors has poured onto American shores. While areas like New York and Miami have felt a surge in Chinese real estate investment, Southern California has been the focal point.

When China finally reaches its Minsky moment in terms of debt growth and the marginal buyer becomes the marginal seller this process will reverse, just as it did with Japanese investors in the early 1990's. If the technology bubble in Southern California were to burst at the same time China begins to deleverage you will see SoCal real estate prices plummet the way Las Vegas prices did during 2008-2009. Why? It will become a market of real buyers that must qualify for a mortgage. To help explain why prices will collapse in this environment please see the following excellent walk-through from Realty Trac on the impact from mortgage rates rising:

Why Real Estate Markets Could Quickly Stall

Perhaps my favorite part of the video below is the rock star Realtor who is confident prices will "double again" from their current levels over the next six years;

"The amazing part, I don't think it's going to end. I think fundamental supply and strong demand is going to drive this market forever."

The Grand Finale For Worldwide Asset Bubbles: Pre-Emptive Central Bank Action

One of the most thought provoking pieces I've read this year is Artemis Capital's October Newsletter titled "Volatility & The Allegory Of The Prisoner's Dilemma" (see below for the full newsletter). There are numerous subjects within the letter that are well worth expanding on, but I'd like to focus on one in particular here today.

Alan Greenspan took over as chairman of the Federal Reserve on August 11, 1987. Just two months after he was sworn in the U.S. stock market experienced the largest one day drop in history; a 22% decline. Greenspan immediately took action to calm the markets through interest rate cuts and liquidity. That momentous fall began the period the period now known as the "Central Bank Put." If the markets were to ever get into trouble, central banks would immediately react to the stem the crisis and "help" the markets resume their climb higher.

We saw this in 1987, 1994, 1998, 2001 - 2004 and 2007 - 2012. Each "put" became larger in scale and duration to help quell any concerns and push investors back into the pool of risk assets. The markets became accustomed to the put, but they were still aware a crisis needed to occur first, before central banks would take action. 

This all changed in the summer of 2012 when Mario Draghi unleashed his "whatever it takes" speech. The European Central Bank stood ready to print money to purchase an unlimited amount of government bonds to ensure yields remained at manageable levels.

Why was that speech key? Because it marked the end of the central bank put era and ushered in a new even more incredible chapter in central bank history. In today's financial world central banks do not wait for a crisis or market decline to occur before they take action; they now follow a policy of "pre-emptive" central banking. 

From Artemis:

"To differentiate, pre-emptive central banking refers to monetary policy action in anticipation of future financial stress to avert a market crash before it starts, even if markets appear healthy and volatility is low."

Just weeks after Draghi's speech in 2012 the Federal Reserve launched QE3. At that time there was little to no stress in the financial system, the economy was gaining jobs monthly, interest rates were resting at all time historical lows and the stock market had already doubled off the 2009 bottom.

In essence, Bernanke felt something could be coming so he decided to act before it even arrived. The following year in 2013 the Bank of Japan provided an encore with their own gargantuan QE program, which they then enlarged in 2014 (it's still running every month!). When the Bank of Japan launched their program to purchase government bonds, interest rates were already resting close to 0%.

The European Central Bank joined the party over the last year with a QE program which still runs today while interest rates across Europe are negative on government bonds years into the future.

Earlier this week they announced plans to enlarge the size of the current QE program and bring interest rates on deposits further into negative territory. Why? They have tasted the QE drug and love the way it feels. They want to pour more liquor into the punch bowl to make sure investors have no desire to leave the party.

More widely watched here in the United States was the Fed's decision to keep interest rates at 0% because the stock market had fallen about 5% off its all time record bubble highs in August.

The central bank put taught investors that if they were ever caught in a downdraft they would be quickly brought whole and could expect new highs in short order. Any dip was to be immediately bought in every market; stocks, bonds and real estate. The put policy was enough to create the environment entering 2008 that almost destroyed the entire financial system.

What we have today with the pre-emptive policy is far, far more troubling. Central banks are leveraging up their easing programs before the markets even have a chance to correct. Any fear by investors in risk assets that markets could even decline in the short term has now been erased. This, of course, is seeping into every asset class; stocks, bonds, residential real estate, commercial real estate, art, venture capital, private capital.....EVERYTHING.

The psychology behind this self-reinforcing paradigm is both fascinating and disturbing. It is the market's collective belief that central banks have the power to elevate and permanently push markets higher that is actually pushing markets higher. The danger exists because the narrative behind this paradigm is actually false. Central banks have no actual ability to push markets higher (as seen during their continuous easing during 2007 to 2009 while markets were collapsing). It is only a false belief in a power that does not actually exist that keeps a bid under risk assets.

At some point asset values reach an absurdity that is so far removed from reality that some market participants began to look around and become concerned. This moment can be delayed for far longer than rational participants can imagine, but it always arrives. It occurred for technology stocks in March of 2000 when a few investors looked at their portfolio of 300x P/E tech stocks and decided to take some profits. It will occur at some point as well for those investors holding negative yielding bonds for insolvent countries like Spain and Italy. The stories we will tell in the future looking back at the absurdity of the world we live in today will make people buying in 2000 and purchasing 17 homes to flip in the Las Vegas desert in 2006 seem tame in comparison.

Unfortunately, the underlying losses are now baked into the cake. The U.S. stock market is now many deviations away from historical fair value based on real life fundamentals of the companies they represent. If interest rates for U.S. bonds were to rise only 300 basis points back up to around the 5% level (still well below historical levels) it would create losses across the board of at least 20% on portfolios (rising bond yields mean the principal value of the underlying bonds decline).

Those are only the losses you can instantly quantify. The secondary impact would be felt in asset classes around the world. Mortgage rates rising would essentially shut down both residential and commercial real estate activity. The junk bond market, perhaps the largest risk in today's bubble universe, would implode. The derivatives market, or the the insurance put in place to cover losses in the bond market, would reveal itself again the way it did in the fall of 2008. Who is the AIG out there that provided the insurance for the $5 trillion in fracking junk bonds (remember the entire subprime real estate market was only $1 trillion in size)? My guess is they are not going to have the cash to cover the losses.

How much longer can this go on? I have no idea. All I know is the further we go down this rabbit hole into the realm of the absurd, the greater the losses will be when the risk off mentality returns.

You can read the complete newsletter from Artemis below:

Tuesday, October 20, 2015

Why I Am Not Buying Chinese Stocks After The Major Decline

Back in September of 2012 when the world had either forgotten or hated the Chinese stock market (which was trading at 2060), I wrote an article titled China's Stock Market Continues To Plunge: Buying Opportunity? I outlined the reasons why I had begun to purchase Chinese shares which centered around sentiment, valuation and my long term bullish outlook for their economy over the next century.

About two years later to everyone's surprise (including mine) Chinese shares began to accelerate upward rapidly and then went vertical. At the end of March with the market trading at 3822, I wrote an article titled China's Stock Market Continues To Soar: Selling Opportunity? I outlined the reasons why I was selling my shares which centered around sentiment, margin and valuation.

The market had essentially become the opposite of what it was in late 2012. Ironically, the Chinese economy was far stronger in late 2012 than it was entering the fall of 2014. This was another great lesson for me that markets in today's world (post 2011) seem to have less and less correlation with economic fundamentals.

As a quick side note, I am not trying to brag about my market "timing" with Chinese shares. In general, I am a pretty terrible market timer. I like to buy assets when they are cheap and hated and sell assets when they are overvalued and loved. That usually means I am very early to markets (I had to wait 2 years before the Chinese market did anything), and usually sit out for prolonged periods of excess and irrational exuberance (as the U.S. stock market has been in for about 3 years). The only reason I took action on the sell side was because the Chinese market had put in gains that would normally take about 10 years to occur over an 8 month period. The euphoria (which equals danger to me) had reached a perilous state.

Almost everyone knows the China stock market story following March 31, 2015. The market continued to move higher for a few more weeks, crossing over 5000, before it quickly collapsed back down to the 3000 range over the next two months.

The question I am often asked today is whether or not I would enter the market at current prices. In terms of valuation and sentiment I am essentially neutral on the market. It has rallied up to 3,424 as I write, bringing some brave souls back into the water.

The biggest change for me personally is what I watched occur during the market decline. Chinese officials essentially panicked, pulling out every measure you could imagine to stem the market's decline. They even went as far as to stop trading many of the stocks on the exchange.

One of the benefits to investing stocks in general is liquidity. Unlike a real estate asset which can take months to sell, stocks can be liquidated in seconds with a keystroke. It is part of the reason why investors (including myself) pay a premium to own stocks over other assets.

If Chinese regulators are going to turn off the ability to sell a stock at the first sign of a market decline, it essentially removes this liquidity premium. I have not heard them mention once they will allow the markets to trade freely in the future, which is probably because they are still terrified of further declines. Until I hear and believe they have made changes to this policy I will continue to be a spectator in their share market. If valuations and sentiment once again become too tempting to pass up (even with the liquidity premium removed) I will let you know I have once again begun making purchases.

Wednesday, October 7, 2015

The Market Decline Is Baked Into The Cake: Why U.S. Stocks Are Going Lower

We've spent the last two years here on this site discussing why the U.S. stock market represents a potentially dangerous asset to overweight within an investor's portfolio.

Stocks recently hit an all time record price to earnings ratio when looking at the median stock of the S&P 500. While the 2000 market peak was skewed drastically higher by the technology sector, this time around the entire market was (and still is) incredibly expensive. By expensive I mean investors are willing to pay a high price to own the future (potential) earnings stream of a company. The investor's share of these profits comes in the form of dividend payments.

These dividend payments represent the second leg of the market's parabolic rise since mid 2011. Along with stock buybacks (which reduce the number of outstanding shares available increasing the value of the remaining shares), companies have continuously raised their annual dividend payments to show yield starved investors around the world that the warm waters of the U.S. stock market were open for business.

Not everything that has occurred over the last four years has been a mirage. U.S. corporations were, up until recently, hitting all time record profits as a percentage of GDP. This has come in large part from the continuous reduction of their employee costs. In other words, companies have improved productivity.

These three pillars of stock market growth have historically been mean-reverting data points. At some point in the future they will move from stock market stimulants to anchors dragging the market lower. 

Pillar One: Price to earnings ratios are sitting at levels where stocks have previously put in secular bull market tops. For a full discussion on P/E ratios and secular markets see: Secular Bear Market Review: Sentiment & Valuation Surrounding U.S. Stocks. You can see in the chart below the P/E ratio for U.S. stocks still remains in the 5th quintile (extremely expensive) after falling just off the highs seen earlier this year.

Pillar Two: Profit margins are one of the most mean reverting economic data points in history. Why? Because competition always enters the market. 

Pillar Three: Stock buybacks and dividend payments are actually the most frightening. These were largely paid for with borrowed money; corporate debt and/or junk bonds. As you may have heard over the last few weeks the junk bond market has already begun to implode (see chart below) and corporate debt rates are rising. As soon as it is no longer profitable (or possible) to borrow money to buyback stocks corporations will stop. If the market begins to fall corporate insiders will retreat from their purchases. Remember corporations always buy back the most at market peaks and disappear like cockroaches at market bottoms (when they should be buying). This is due in part to human psychology and in part to the way decision makers are paid; meaning they try to cash out and prolong the party as long as possible at the expense of future quarters which will be on someone else's watch (and bonus period).

No asset class that has become the darling of global investors goes up forever (U.S. stocks have been the darling asset class since early 2012). Eventually mean-reversion returns and what you experience on the way down is a series of waterfall panic declines, similar to what we saw in August. Moves tend to be more violent on the way down because hot money tends to enter markets late and when they realize the trend has been broken they quickly exit. Looking from a behavioral perspective, investors fear losses far more than they enjoy gains. This fear creates irrational selling during declines, which tends to peak at capitulation bottoms. Another reason for waterfall declines is the build up of margin (debt used to purchase stocks) on the way up. As prices rise, so does confidence in future price gains and the courage to use debt to purchase more stocks. This strategy did not work out well for the Chinese over the past year, and the story will end the same for U.S. markets.

The instabilities in the financial system are already baked into the cake like a fragile snowbank resting on the side of a mountain. It is not a question of whether the snow bank will become an avalanche, it is only a matter of when it will occur. People spend their lives trying to figure out which snowflake will create the instability that moves the entire snowbank, hoping they'll be able to time their exit from the mountain before that snowflake hits the surface.

This is exactly what we see throughout the markets and financial system. Central banks have built an unstable snowbank that looks perfectly calm on the surface. The snowbank has been building for so long people have completely forgotten the reason for the last collapse. Nowhere is this more noticeable than Ben Bernanke's recent media tour promoting his new book "The Courage To Act." By "act" he means printing trillions of dollars, saving bankrupt companies and holding interest rates at 0%. Those that understand finance know true courage would have been letting bankrupt companies fail and raising rates to protect the middle class savings of America. Just as the perspective surrounding Greenspan shifted from the "savior of the world" to "the man responsible for destroying it," people will eventually look back and understand it was Bernanke who was/is responsible for the next major crisis.

If we know the markets are unstable and we know the most expensive markets represent the most danger (U.S. stocks), then the question is not whether stocks will ultimately continue their decline, but what will happen next?

The world will once again look to the Federal Reserve to see if they have "The Courage To Act." My bet is this courage will arrive in the form of QE4 and/or negative interest rates. We are well overdue for a natural recession in the United States and there are many global landmines around the world (emerging market corporate debt, China, commodity company blow-ups, geopolitical concerns, or the vast array of global real estate bubbles). The global economy is already slowing down because the world is drowning in debt. Debt charges growth in the short term at the expense of the future and the future has arrived. The world was considered at the point of "peak debt" in late 2007 as we entered the global financial crisis. Most people believe we have been deleveraging and paying down debt since then. What actually happened? The world has borrowed over $60 trillion on top of the debt mountain that was already in place in 2007. This was not only made possible, but encouraged by global central banks which have held rates close to 0% for years:

While expanding their balance sheets rapidly through QE programs (we will have another full discussion on the coming crisis in Japan soon):

What happens if we enter a global recession at the same time one of the major economic swans enters a crisis (for example, China experiences a hard landing)? The Fed's response (QE4) will most likely make the first 3 seem small in comparison.

The better question is, what is the ultimately endgame? This will occur when one or all of the major central banks loses control and credibility within the financial markets. Can the Fed engineer another artificially recovery in asset prices? Maybe, but they are moving closer to the point when the markets no longer believe in their "magic powers." You could feel this begin to happen over the past few weeks if you were paying close attention. After they announced they would not be raising rates the U.S. markets sold off. They immediately began sending out their "talking team" to say that they still plan to raise rates in 2015 because the economy is strong. They have already begun to chase their tail, and when they lose control people will look back years from now in disbelief that market participants actually regarded them with some kind of godlike power.

The "Fed behind the curtain" has fooled an entire generation of investors. When the curtain is pulled there will be chaos and opportunity for those who have been patiently waiting.

For more see: Governments & Central Banks Do Not Control Market Movement