Summary: * Friday the 13 was an unlucky day on Wall Street * The Dow was down over 200 points - the second back to back decline of over 1% since August * What was happening in August? Everybody was convinced the Fed was going to raise rates in September * Now, everybody is just as convinced that the Fed will raise rates in December * Once again, as I predicted a week ago, the market sold off * We are down over 650 points on the week * Nasdaq is down today even more - 1-1/2% * The carnage was once again led by the retailers * Bad earnings out of Macy's Nordstrom's Walmart and others set the scene for new share price lows * I have been warning about this all year, based on inventory numbers * All the evidence is flashing recession * The Fed has been saying that they are data dependent - open your eyes and look at the data! * This data is consistent with the beginning of a recession * Yes, unemployment is low, but unemployment is always low when recessions begin * I think the Fed knows they are not going to raise rates * The Fed minutes are coming out next week and we'll get an insight into the deliberation between the members * All Janet Yellen said was that an interest rate hike was a "live possibility" - The market did the rest. * They took the word "possibility" and assumed that it was a probability * Let's look at the economic data that came in today: * First, October Producer Prices - they were looking for a rise of .2, because last month, they actually fell by .5 * We didn't get .2; we got -.4 * As of last month, year over year producer prices have declined 1.1% * Now they are down 1.6% on the year * This is going the opposite direction of the Fed's goal of 2% inflation * The worst number was retail sales: * They were looking for a rise of .3, which is still not a big rise - but we got an increase of just .1 * To add insult to injury, they had adjusted last month's forecast to zero * Also x auto, they were looking for a gain of .4 and instead got a gain of .2 * These numbers will subtract from Q3 and Q4 GDP * We also got September inventory numbers: * The consensus was a rise of .1, but instead we rose .3 * This rise was not a result of an increase of sales, it is because sales are not keeping up with inventories * The inventory to sales ratio rose to 1.48 fro 1.47 * The last time we had this number was during the financial crisis * I have been pointing out that these inventory numbers have been padding the GDP for the last several quarters * This has been ignored on Wall Street * This means future GDP will plunge as companies need to liquidate inventories and not replenish them * Not only that, they will be liquidating their workforce * The heavy layoffs may not happen this year - more likely they will come in January and February * The odds are that the Fed is not going to raise rates in December and the odds against a rate hike as the market continues to sink, with more and more bad economic news * This bad news about retail sales was unexpected by the market as evidenced by the sharp drop in share prices * Is the Fed going to raise rates just as the economy is turning down? Not a chance. * If they do, imagine how much worse the economy will be * The question is: When is the Fed going to come clean and admit that they are not going to raise rates and will their excuse be and will the markets buy it?
