“What goes up, must come down….
spinning wheels got to go ’round….
Talkin’ bout your troubles it’s a cryin’ sin…
Ride a painted pony,
Let the Spinnin’ Wheel spin….”

-Blood Sweat & Tears….1969


This morning we wake up to a bit of “Blood Sweat & Tears”……Markets around the world are under pressure. Asia gets clocked, as it was the first global market to respond to the FED speech, following the confusion yesterday over what Benny really said…..


Japan down 7.32%, China – 1.3%, Hong Kong -2.54% and Australia – 2%….


So… Are we in? Are we out? Will the FED taper? Will the FED accelerate? Is the economy strong or weak? Are the FED members in agreement or are they divided? YES, YES, YES, YES, YES, YES…..- the message is still the same. We did not get any new information yesterday at all. Everything that he said is exactly what they have been saying all along. “An early tightening would pose a risk to the US recovery”. Benny made it very clear, it will be very hard to navigate out, this ain’t happening overnight and he will not withdraw until the economy improves.


Maybe we will, or maybe we won’t, we need to get more numbers on the health of the economy, we can’t prematurely pull out, so we are staying in (for now), we could begin to taper or we could press on the gas even more IF we need to……. and the spin continues…..The WSJ ran the headline: “The Fed’s Varied Voices Leave Market Guessing” It´s almost schizophrenic, no? Does it feel like a breakdown of the thought process? Was the speech disorganized or delusional? He hedged himself every way, so no matter what happens he can say he addressed it….. Is it me?


Listen… Technically, global markets have been ripe for a sell off. It doesn’t get much more extended than this, Relative Strength Values pushing better than 80%. But the stock markets NEEDED a trigger, a catalyst to re-price. Why is everyone so surprised? Have you not seen a chart of the S&P for the past 6 months? Straight up, no consolidation.


I don’t believe we have any clearer picture of the Fed’s intentions after the latest testimony before Congress or in the release of the Fed’s latest minutes. Many now think that both Benny and the Fed’s minutes seemed to confirm a tapering of QE sometime in the summer of 2013, whereas before it was a spring 2014 event…..Well, not so fast” Is that what he really said or is that what people think he said? All he said was we might or we might not, we need more consistent macro data pointing to a sustained recovery…. The one sentence in the minutes that people are using to justify this interpretation is that is,


“a number of participants expressed a willingness to scale back the central bank’s $85 bil/mo in asset purchases, perhaps as early as June, if the US economy picks up further”.


Expressed a willingness? Perhaps as early as June? IF the US economy picks up? Really? Is the global macro data going to improve in 2 weeks? Is the US economy going to pick up in 2 weeks? Are we going to produce jobs at the rate of 300k/mo anytime soon? Come on! How ridiculous is that? Remember one thing, the FED has been pursuing the MOST aggressive stimulus program in its 100-year history. The very fact they are being forced to take such extraordinary monetary policies suggests these are not normal times and anyone living in the states now also knows that times remain challenging. These have been the most difficult economic times we have faced since the Great Depression…..(or at least that is what I am told – for clarification – I was NOT here during the great depression – but my 100 yr old grandmother was and she has a vivid memory.)


Yesterday, we learned that not only is the Fed providing QE3 at a rate of over a $1 trillion a year, but the Fed has also provided a trillion dollars to foreign banks to help shore them up. Truth be told, do we really know what the Fed’s balance sheet is expanding to and/or the enormous risks that may result? Is it any wonder the Fed is cautious about their exit strategy? Is the market really reflecting the fundamentals of the economy or it is reflecting the mood of the FED?


US futures this morning were pointing lower by some 20 pts, but have since settled in at -13 for now, an opening at this level would pierce the 1645 support and then leave us open for further weakness, possibly testing 1635. Although this would represent a 2.5% pullback, it would not cause much technical damage. A pullback to the 50 DMA of 1588 would only represent a 5% correction, leaving the market still up 11% ytd. A pullback to here would at least take some of the “fluff” out of the recent move and give long term investors an opportunity to put more money to work.


Economic data today includes Init Jobless Claims – exp of 345k, Cont Claims of 3 mil, US Markit Preliminary PMI of 51.2 (which would be a DECREASE over last month suggesting more weakness), New Home Sales of 425k annually, and the Kansas Fed Manf – exp of -4.


Overnight in Asia, volatility was the name of the game…..Japan was initially +2% then turned tail and ended -7% – a 997 point swing. The perfect storm. Fed commentary, Weak China manufacturing numbers below 50 (contraction) and a stronger YEN all being pinned as reasons for the selloff.


In Europe markets are all lower as they take the lead from the action in Asia overnight. Do I need to throw in the FED commentary?


FTSE -1.18 %, CAC 40 -2.27%, DAX -2.43%, EUROSTOXX -2.19 %, Spain -1.6% and Italy -2.52%.


Take Good Care
KP


Calbrian Shepherd’s Pasta


This is a quick an easy meal that take no more than 20 mins to make. It is filling and delicious. Legend has it that this pasta dish originated in Calabria by sheep herders that needed a quick yet hearty meal – thus “Shepherd’s Pasta”.

Since there are only a few ingredients and is easy to make – expect that it might become a family favorite. For those of you who are gluten free (gf) – feel free to substitute your favorite gf pasta in place of the traditional. This dish works well with spaghetti, or farfalle, ziti or fusilli….etc.


For this you need: 1/2 Pound Fresh Italian Sweet Sausage – removed from casing, 2 Cloves Garlic, Peeled & chopped, 1 Pound Of Pasta of our choice, Olive Oil, 1 Pound Fresh Ricotta Cheese, S&P, Grated Pecorino Romano Cheese, chopped parsley (for color).


Bring a large pot of salted water to a boil and add the pasta.


In a lg sauté pan, heat up a splash of olive oil and cook the sausage until lightly browned, breaking up the sausage meat with a fork as it cooks. Add the garlic and cook. Add about ½ cup of the pasta water to the frying pan and keep warm over low heat.


Cook the pasta until al dente, then drain the pasta, reserving a mugful of the pasta water.


Keeping the heat on medium – return the pasta to the pot – add another splash of olive oil and stir. Now add the sausage stirring to mix. Add the ricotta, and enough of the pasta water to moisten so that the ricotta coats the pasta. Remove from the heat. Taste for seasoning and adjust with pepper (as the cheese is salty) . Stir in the grated Pecorino cheese.
Serve in warmed pasta bowls, offering additional cheese to your guests.


Buon Appetito.