* Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today
* He didn't deliver the stimulus traders expected
* The big question is, will Janet Yellen surprise the market by failing to raise rates?
* The ECB did slightly lower interest rates, and extended QE if it will be needed
* Draghi's goal is inflation
* He equates 2% inflation to "price stability", when prices in Europe are stable now
* The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease
* The reality is more likely to be the reverse
* If anything, the European recovery is just getting started, and the U.S. recession is just getting started
* As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day
* The dollar was weak across the board
* The stock market, including the DAX, fell accordingly
* Both U.S. stocks and bonds experienced a selloff
* Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets
* The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize
* We also got a key reversal in gold
* Overnight it made a new low, but closed substantially above that level
* The euro is still weak, it is just not as weak as the market expected
* The best environment for gold when the weakest currency is the dollar
* I wanted to address Janet Yellen's testimony today responding to questions
* Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2%
* She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4%
* I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S.
* Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016
* Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric
* Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had
* She said, if we did raise rates, then we would lower them
* Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past
* If QE worked so well in the past, we would not experience a recession in 2016
* You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels
* If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity"
* How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain?
* This loss of credibility in the Fed will precipitate a dollar crisis
* Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number
* The market is focusing on the service sector, yet the most important jobs are the goods producing jobs
* Lat month, we got a higher than expected jump in the non-manufacturing number:59.1
* This month we wend all the way down to 55.9, which is dangerously close to contraction
* If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic
* Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative
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