The last month or two we are seeing what feels like unprecedented volatility within our markets. It takes us back to the time Bear Stearns and Lehman were ready to collapse and our central bankers were scrambling to avoid a global financial shut-down that would have plunged the world into the depths of an economic armageddon.
Take a look at the following changes in share prices and accompanying market capitalization just in the last three days alone:
- Apple hit a low of $92 per share on Monday and closed yesterday at $109.69. Using fully diluted share count of 5.77 billion (June 30, 2015 b/s), the company's market cap went from a low of $530.8 billion at the low on Monday to $632.9 billion at the close of regular market trade last night. Change in market cap from the lows to yesterday close is 19.3% swing in 3 days. At the lows, Apple would have given back 14 months worth of gains.
- Amazon hit a low of $$451 per share on Monday and closed yesterday at $500.77 per share. Market cap change in 3 days from a low of $214.7 billion to 238.4 billion, using the company's diluted share count of 476 million FD shares out as of June 30, 2015.
- Priceline hit a low of $1151 per share on Monday and closed yesterday at $1223.46/share. Change in market capitalization using most recent fully diluted share was 6.3%
- Netflix hit a low of $85.50 per share this past Monday and closed at $110.13 last night for a change in market capitalization of 30% in a mere 3 days.
- Google saw its market change change by 11.2% in the same three day period.
With the exception of Netflix and Priceline, we are looking at unprecedented amount (change in market capitalizations amounting to tens of billions in a mere three days) of needless volatility within global markets thanks to the misguided policies of our Federal Reserve, disparate and diametrically opposing statements from the various Fed heads, and the complete lack of acknowledgement that the world's financial markets are tied primarily to our markets.
The U.S. is the dog that wags the global tail, no matter how much the various Federal Reserve members deny that fact or play it down, or in some cases ignore it altogether.
Like it or not, you just cannot have the central bank of the world's most powerful country with the biggest economic influence in terms of GDP, consumption, income etc. decide to be a maverick on interest rates, especially when inflation (the main boogeyman) is nowhere in sight here at home. In addition, given the fact that the real employment rate is far lower than the one reported and the absolute collapse in commodities ensuring that it will be a while before inflationary conditions will warrant a rate hike here at home, the rate hike mantra by our Fed just does not compute.
If the Federal Reserve members don't straighten out their acts they will be solely responsible for scaring the individual/retail investor away from our markets for good. Gen Y already wants nothing to do with our stock markets thanks to what they have seen, read and heard while growing up.
So, yet again, the blame lies squarely on our Federal Reserve. Like I have said in previous articles, Greece, China, Puerto Rico, Brazil, and even the scary monster under Janet Yellen's bed, are just excuses.
The one and only problem is the U.S. Federal Reserve's crusade to prematurely raise rates and none other.
(please note I am long all the stocks mentioned including derivatives long and short)
