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James Bianco, Bianco Research president, on the Fed's decision to leave interest rates unchanged, and the impact on the market for the rest of the yea...
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Prevention joining me now is Jim Bianco CSC.
Surgeon -- You are a lot -- a lot like many of our guests that come on and say that it's a liquidity party that is fueling this market that the Fed.
This week said that it's not gonna let up on -- rates I act even a bit until 2014.
So far as we know right now.
So what could spoil this party that the hasn't hasn't gone on for so long.
Inflation it's all about inflation as long as you don't have it.
The Fed can continue to do what they're doing in risk markets can continue to rally.
Despite the fact that earnings estimates are for negative earnings growth in the second and third quarters of this year.
Despite the fact the company guidance is now turned negative more companies are lowering their forecast than raising their forecasts none of that matters -- market goes higher.
Because the Fed keeps providing liquidity and as long as there's no inflation in the party continues.
Well we're not -- inflation really take up at least over the short term is what the Fed is predicting here so again that we're seeing Green lights all across -- Yeah -- right that we don't have it yet so the party continues but.
The Fed came out January in their meeting and they said OK our metric is the personal consumption expenditure index the PCE and we'd like to keep it under 2%.
Over the medium term.
Every measure of the PC the current measure the PC and every forward looking measure from the market to tell what -- what we expect inflation to be.
Slightly above 2%.
So they're all little elevated but the Fed is telling us -- don't worry about that it's all temporary if it will come down over time.
So it's not quite there yet that we have to say there's an inflation problem.
But it's beginning to get into the conversation but for the market now it's not in the conversation so continues to move.
Hire and to your point -- looks like today investors are just wing -- gold treasuries and -- looks like pretty much smooth sailing -- from Wall Street's point of view.
For stocks what does that have looked investors particularly at fixed -- -- I know you're -- a year your main specialty.
Yeah eight year fixed income the bond market is going to do it's gonna struggle on the stock market makes new highs.
And that's what it has been doing gold is going to continue to struggle.
Why not the market is continuing to move higher right now and there's no -- Talk of QE like last week when we were down 200 points.
And the Fed was hinting around at sterilize QE gold was flying bonds are flying the stock market was going.
-- -- -- -- What do you make them have the notion that divorcing this is your opportunity you have -- an opportunity.
You do well above last year against conventional wisdom now's your chance to get the heck out of -- what do you say to that.
I have to reject the idea in the first place there are no investors and -- the numbers that show that in the amount of money that's going into bond funds.
It all going in the corporate bonds which is just an equity light type of thing and that is performing as well.
But this idea that there's all this money parked in government bonds and in mortgage bonds it's not true it's all the Fed the Chinese Central Bank in the Japanese Central Bank that the buyers of it.
So there is no money hiding in there is -- in your money market mutual funds over trillion dollars has come out of money market mutual funds last couple years.
The money has been leaving those in droves for several years now so.
This idea that all OK now's your chance get into the stock market and get out of bounds they're -- they've never been there in the first place.
-- I wanna bring up the markets and the tech markets in particular are looking at -- NASDAQ pulling back but still well above the three.
Thousand level are we not bubble what makes today different than what we so twelve years ago.
Well wait out of 5000 that's -- -- -- twelve years ago as far as the market does fit the NASDAQ stocks are high beta version.
Of the rest of the stock market it goes up more than the stock market goes up it goes down more.
So we've got a liquidity driven rally.
Then NASDAQ stocks and let's leave apple off the equation is being a separate aspects back at 670% of you awaiting of the index right now.
But the rest of -- go up more than now than the overall market they'll go down more than the overall market.
And I see gets picked a pattern that we have right now with NASDAQ so if you think that the rally's gonna continue.
Then a place that will outperform will be the tech stocks if you think the rally's gonna -- the place it will underperform the worst will be the -- -- Tech stocks Jim Bianco president of Bianco research always great having on thanks for insights today.
