Nell Sloane’s trading notebook: FOMC rates up because of growth, but they are saying the consumer is feeling the effects. The SEC on IEX and high frequency trading. Bonds held up well considering, not only with Russia selling but the Fed’s rate hike as well.

The Federal Open Market Committee raised rates for the second time this year, raising the band to 1.75/2.00%. The Fed has also upped its optimism for the growing economy forcing many to believe we will see 2 more 25bp hikes this year.

Fed raising and pinching: We thought it was ironic that the WSJ had an article entitled “Consumers feel pinch as Fed tightens policy,” right next to the rate hike article.

So, on one hand they are raising because of the growth, but on the other they are saying the consumer is feeling the effects. Now we know policy acts with a lag, but we would rather the Fed admit that we live in a 2-tiered economy, one by which a very select few have benefited immensely, while the majority continue to be saddled with massive debt and debt associated costs.

What is obvious to us is that the Fed truly doesn’t care about the overall disparity as long as inflation grows just enough to gradually debase the monetary base. Chair Jerome Powell even suggested that inflation above 2% wouldn’t be a worry at this point, yeah no kidding, how else do we purge debt…but inflate it away?

**

We also read that an SEC study of IEX’s speed bump can help investors protect themselves from HFT predatory activity.

Gee go figure, how ‘bout you just ask anyone who has any insight to trading, has traded and understands how order matching systems work?

Back in the pit days the majority of bids and offers were solid and upheld, meaning what you quoted is what you got. (If you reneged, you got punched in the mouth and nobody would trade with you.)

This is not the case with today’s HFT front running algorithmic systems, to put it plainly they can bid and offer at the same level at the same time and do it billions of times a day.

**

What benefit does this give anyone? What protection does this give the investor? How can this possibly be a fair practice when speed is the only determinant to getting an order filled? It can’t and the other falsehood that HFT provides liquidity is patently false, just look at the volumes of Fixed Income government bond market cash trades and you will see.

Decades ago the volume per clip was 5 to 7x larger than today. Tell me how that makes sense considering the debt markets are factors larger.

Yes, we can chalk some of that up to warehousing, but not all of it. We would rather tell you from the front lines where we have spent most of our career, that HFT can’t be trusted, thus the markets can’t be trusted, thus the markets are no longer markets.

Damn that was a mouthful, but we hope you are picking up what we are putting down.

**

Anyway, without talking about individual markets too much, we will simply post our weekly futures and cash settlements of the markets we follow below.

**

Russia dumps US paper: One thing of note was that it was reported that Russia continues to unload U.S. Treasury paper. In one month, Russia dumped half their holdings, which would put their holdings to just under $50 billion.

What is interesting is that bonds held up pretty well considering, not only with Russia selling but the Fed’s rate hike as well.

As much as Russia wants to move out of bonds and into the likes of gold most likely, doesn’t mean the price of metals can’t fall in the short term. In fact, on Friday, silver was monkey hammered, gold as well but not as hard.

Is this a new breed of Axis vs. Allied all over again? Nasdaq continues to shine, go figure!

Futures Quotes

Cheers!

Nell

Subscribe to Nell Sloane's free Unique Insights and Crypto Corner newsletters here