Friday Night's Show Highlights:
Next week is all about selling to get shares in Alibaba's IPO!
Friday, September 12, 2014
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Jim: Jeez, a lot of things are going whacky all at once here. That's how you get a day where the Dow fell 61 points. At one point, it looked like it was going to be much worse. What's causing all this turmoil? I would say, a lot of it is behind-the-scenes action in the bond market, something I've always told you can be a real problem for equities.
Now let's jump right in with our Game Plan to figure out what's happening with this market. Typically, I'd start with Monday, right? And I'm going to get to that. But first you need to know that next week we've got a Fed meeting on Wednesday. And today people put on a lot of bets that the Fed's going to signal - rightly or wrongly, I don't know - that the easy money is about to end. We've had the considerable amount of time that we knew they were going to wait before they would start raising rates. I've told you there's going to be an air pocket in the stock market when they do, and I've always warned you to be ready for it.
In last week's Game Plan, I mentioned that I thought a strong retail sales number could stir the Fed and cause rates to rise. Well guess what? We got that strong retail sales number and, immediately, interest rates spiked, in anticipation of the Fed changing its policy on Wednesday, rightly or wrongly.
Now, as I've said repeatedly on the show and in my books, we have to respect the bond market because, when it take violent action, it could leave tremendous damage in its wake. Today's action seemed a bit ominous, as interest rates moved up dramatically, and the yield on the 10-year Treasury went all the way up to 2.6%. I know, all the way up... that's probably hyperbole (i.e., exaggeration). Historically, it's not that high. But we know from the spring of 2013 that the velocity of the move is what freaks people out and causes them to sell stocks, like they did back then. Whereas, I say in Get Rich Carefully, these days, if...