December 9, 2013
This is Mark Vickery covering for Sheraz Mian, who will be away on business until later this week.
To taper or not to taper… that is indeed the question. Matter of fact, it has been for some time now. Consider all the economic good news that's come out over the past couple weeks and compare that to the aggressive sell-off in equities of late, and you'll see that "taper-phobia" is real. That it probably shouldn't be — and that we've by now beaten this war-horse to near-death — is rather beside the point.
We also may be beginning to embark on a new, somewhat dangerous, period of "newslessness" — where we exist in limbo between initial holiday retail sales from Black Friday to ADP (ADP) and non-farm payroll reports from last week to portfolio adjustments at the end of the year. Low volume activity in the market may overly inflate the importance of what happens within times like these.
Thank goodness for the Fed, then. Certainly the possibility in the next couple weeks of tapering the $85 billion bond buybacks per month will be like taking the training wheels off the bike — which may lead to a trading tantrum or two (just make sure to wear your helmet) — but ultimately coming to a long-term resolution regarding this temporary economic assistance will not only be a good thing for the U.S. economy, but will be a positive from the perspective of removing doubt and guesswork from the market.
Look no further than the major punitive payouts from our major banks like JPMorgan (JPM) for comparison. Sure, billions of dollars in outlays are finally taking place, but at least this allows the accounting of other business to move forward without so many question marks attached. This leads limiting uncertainty, which leads to a stronger trading environment.
Elsewhere, food distributor Sysco (SYY) has agreed to purchase U.S. Food for $300 million in stock and $500 million in cash. Analysts are reporting this is a strong move for Sysco to maintain its lead in the industry by buying out one of their main competitors (to say nothing of the benefits to be garnered by ubiquitous financier Kohlberg Kravis Roberts [KKR]), and SYY stock in the pre-market is trading up more than $9 per share.
Mark Vickery
Senior Editor
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