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Markets got hit by profit taking yesterday - I wouldn’t read too much of it, because you are going to get some down days in any uptrend.

Today I’m going to talk about a more long-term problem, because it suggests that Federal Reserve policies are not really working right. That doesn’t matter at the moment, when things seem fine, but will one day.

What you are looking at above is a chart of the TLT bond ETF, which is for the 20-year Treasury bond. When the bond price goes up the yield goes down and vice versa.

So, when the Federal Reserve lowered interest rates in September the yields went up on longer-term bonds!

I never seen that happen before, but it meant that there was no reduction in people’s credit card interest, mortgage rate, or car loan rates, after the Federal Reserve lowered rates.

In the past the Federal Reserve would lower rates and long-term yields would go down, to help ease credit conditions.

And they have gone up again the past five days too, because the TLT went down.

This happened as Wednesday’s CPI report, showing an annualized 2.7% inflation rise for consumer prices, came out. And yesterday the producer price index showed an annualized gain of 3%, the biggest gain since February.

So, inflation is ticking up, and the bond market is not moving the way the Federal Reserve wants.

All of this shows you that there is zero economic reason for the Federal Reserve to lower interest rates next week. The stock market has rallied to new highs, there is no recession right now, and inflation is ticking up, but they are going to lower rates anyway.

The action since the 50 rate cut in September shows that the long-term yields are saying that rate cuts are not needed now.

The Fed told you the CPI would go down towards 2% by the end of the year when they lowered rates in September and it is ticking up instead!

I can tell you this - they WILL NOT be lowering interest rates in January and, if there is no recession, probably won’t again in all of 2025.

Oil prices are now tapping on $71 a barrel this morning, having risen this week.

-Mike

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And…..

Here is a major media stock breaking out into the end of the year, looking like it is coming out of a stage one base into a stage two 2025 bull market.

A lot of media companies are in trouble, with cord cutting, ratings drops, and there is going to be a lot of mergers and consolidations in the next few years as a result.

Maybe PARA will be one of those stories. It owns CBS, Showtime, MTV, Nickelodeon, Paramount, BET, and more.

-Mike

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