What Happened Last Week

Wednesday's drama colored the week's market action. The Fed raised 25 bps. That was expected. Normally, when something expected happens, the stock market will go down. That's because the expectation drove prices up. So when the news comes out, it's time to sell. It's called buy on the rumor, sell on the news.

So didn't stocks sell off? It seems we need to look at the Fed Chairman's remarks for the answer.

After announcing any rate decision, the Fed Chairman, in this case Jerome Powell, makes a few perfunctory remarks. Why perfunctory? A guess: There's not reason to dredge up emotions with a possibly misplaced word. So less is best. 

You see, lots of investors apparently sit on the edge of their seats and listen intently to every word, perhaps even watch ever gesture. They think they'll get an edge up on what's to come not simply by listening, but by then interpreting the pearls of wisdom that drip from the Fed Chairman's lips. At least that seems to be what goes on.

Nothing much happened in the markets during the perfunctory remarks.

After the announcement - in this case, rates up 25 bps - and the remarks, the Chairman takes questions from the media. And so it went. It would seem that's when the markets perked up. 

One of our Brain Trust folks made this observation: The stock market was set off when Powell used the word "disinflation" - just at that point. Just one word. That's all the Bulls needed.

We'll let you sort through the logic or lack thereof of all this. It is what it is.

Coincidentally (actually two days later) I happened to be on a call with a client, who had some issues with Schwab. As occasionally happens, I offered to join the call, knowing the client would likely face the usual baloney that questions and concerns elicit when you call these big outfits. And it's gotten worse lately as the Big Boys (e.g., Schwab, Fidelity, Vanguard, TD Ameritrade, etc.) have had a huge increase in assets and customers over the wild Bull years. The need for more people has resulted in the hiring of many with little experience or, frankly, ability to listen and use their brains. So when you call, there's a good chance you'll get some combination of unhelpful response, nonsense, or outright wrong advice, even as you're shunted from one rep to another: "Oh, if that's what you need (ten minutes after trying to explain it multiple times), I have to switch you to our ____ team."

Anyway, that's why I offered to get on the call with the client.

And so the usual transpired. 10-15 minutes with the initial service rep. Then a switch to another area, with a 5-10 minute on-hold lag (which was repeated two more time, by the way).

How does this connect to the Fed announcement and the stock market? Well, we saw how stock investors jumped at the word "disinflation" (even though it made no sense), with gasoline thrown on the bullish fire by the HFTs (high-frequency traders who account for the majority of trading on the NYSE). But now it's two days later and we're not in the midst of the high-emotion, HFT-fueled ridiculousness of the preceding Wednesday. 

Now, you have to know that these holds with Schwab are filled with a constant blather of "commentary" by people with smooth sounding voices reading copy prepared for them by...well, who knows. Most of this is a harmless combination of senseless, occasionally stupid sentences (unless you actually take it seriously, in which case it might be outright dangerous). 

And so it went during our holds. And because you can't hear the other person when you're on a joint call, the volume of the blather precluding any communication, occasionally a phrase or two may penetrate your completely rational effort to block out the nonsense. (Of course, you can't not listen, since you're waiting - forever - for that next person to pick up their phone.) In this case, a comment stood out that almost made me angry. 

The smooth-talking reader asserted that the Fed Chairman's remarks indicated that the rate increases would be ending. Of course, he said no such thing. He actually tried to make it clear that the Fed Committee (the members who make the decisions) could see not reason to stop the increases, even as they reduced the rate to 25 bps. So the Schwab blather was plainly false.

You can't help but wonder if they knew this and figured a comment like this would spur their customers on to buy more stocks, a boon to the bottom line. Not knowing for sure, you have to allow that they simply couldn't understand the relatively clear English sentences Powell enunciated. Either way, though, some combination of nefarious and pitiful.

So why the almost-anger? Why the split-second urge to tell the next person in line to talk to us that their listening blather spouted lies? Well, it's true, for one thing.

As for the anger, that's a vestige of the past - before I learned that remaining at peace is the only way to work effectively, never mind the only way to remain recollected in God's Presence as you go through your work day - a subject, perhaps, for another time.

Still, I could have peacefully communicated with the next person in line and told them they were promoting a falsehood. But what's the point? Will that person actually be shocked and report it to their bosses? 

You guess. 

But it wasn't all bad. In a similar call with some clients with Vanguard a while back our holds were filled with music that had me thinking that the person (or persons) who decided on that music were possibly sadists. It was that bad.

Meanwhile, we're in the grip of an arctic freeze. It was 4 degrees with wind chills around -10 this morning. Thankfully, we have heat and so I was not in any danger. Not only that, but the freeze won't last. Temperatures will slowly rise through the day and we'll be up in the mid-40s tomorrow - back to our warmer than usual winter weather.

And that call eventually did end (an hour and forty-five minutes later!), which was, as you might imagine, a relief. 

Was the client's issue addressed to the client's satisfaction? No (even after all that time!). But we did scope out a way to work out a solution, between the two of us. 

So now with things warming up, I guess it's OK to take a little break for the rest of the weekend. I don't know about you, but I could use it.