Society and Capitalism...

August 16, 2015 -  ATAC Week in Review: It's Time to Get Mad "Sometimes, you have to get angry to get things done." - Ang Lee US large-cap headline averages continued their on-going choppy sideways trend as small-caps and emerging markets faltered last week in a continuation of a pattern that has persisted for much of 2015. The average stock has not had a good year so far, with many in flat-out correction/bear market territory, something which is largely under-reported, while at the same time Utilities and Treasuries are performing quite strongly in the near-term. The price behavior of Utilities is quite important here. As show in our 2014 Dow Award winning paper (click here to download), the Utilities sector tends to be an early predictor of stock market volatility to come going all the way back to 1926. The fact that seemingly out of nowhere in the last few weeks the sector has outperformed the S&P 500 (SPY) at the same time everyone is endlessly debating if the Fed will raise rates in September suggests that there is a growing safe-haven bid underway in advance. As I argued on CNBC last week (click here to view), we may be entering the third stage of deflation truth, making it hard for the Fed to not only try to raise rates in September, but also create an upward tightening trajectory. For those that care about the fabric of society and capitalism, it's time to get mad. After creating the conditions which led to the financial crisis, the Federal Reserve arguably has left the future of the middle class in doubt. Indeed the gap between rich and poor has been a long trend in the making, but the actions of the last several years by central banks has exacerbated wealth concentration as interest rates and income repression favored asset holders, at the same time technology removed the bargaining power of employees to demand higher wages. The Fed with its continuous mixed messages ("well I think we should raise rates" one day, "inflation is still too low to raise rates" the next day) has encouraged a culture of short-termism on Wall Street, which has always been a problem but is even more so now. The myopic behavior that the Fed has conditioned in money