There are a couple of things that are simply hard to conceive currently. The first is that there are only SEVEN (7) Monday's left until Christmas. The second is that the Federal Reserve is seriously discussing increasing interest rates given the current economic weakness both domestic and global. 

While many of more mainstream outlets continue to "hope" that we are on the cusp of economic resurgence, as I penned earlier this week, the EOCI index suggests something quite different.

(Note: The EOCI Index is a combined measure of the Chicago Fed National Activity Index (85 subcomponents), the ISM manufacturing and services index, the Fed regional manufacturing surveys, the Leading Economic Indicators index and the NFIB small business survey. Combined these measures give a broad sense of actual economic activity.)

"Despite hopes of a stronger rates of economic growth, it appears that the domestic economy is weakening considerably as the effects of a global deflationary slowdown wash back onto the U.S. economy."

Of course, while mainstream analysts and writers cling to each comment from the Fed as if it were gospel, it should be remembered that Ms. Yellen and her cohorts can not "tell the whole truth."

Imagine for a moment that Janet Yellen climbed up to the podium and said:

"After many years of ultra-accommodative polices, it is clear that ongoing interventions have failed to boost actual economic growth and only exacerbated the destruction of the middle class. It is clear that employment growth has only been a function of population growth, as witnessed by the ongoing decline in the labor-force participation rates and the surging levels of individuals that have fallen out of the work-force. While we will continue to operate to foster maximum employment and price stability, the reality is that the economy overall remains far to weak to sustain higher interest rates or any tightening of monetary policy."  

As soon as those words were uttered, the markets would plunge dramatically which would erode consumer confidence and trigger an almost immediate recessionary environment. 

So, if you were Janet Yellen, what message would you deliver to convey much of the same without "freaking" the markets out? How about this from yesterday:

"YELLEN SAYS IF OUTLOOK WORSENED FED MIGHT WEIGH NEGATIVE RATES"

Negative interest rates were "trial ballooned" after the September FOMC meeting and were dismissed by the markets. This is the second "trial" by the Fed to gauge market reaction. Historically, such hints have had a tendency to become future policy actions. It is worth paying attention to what the Fed is "NOT" saying.

I have been extremely busy this week working on a new project, so I am sharing with you the list of articles that I will be catching up on this weekend. 

THE LIST

1) Bond Market To Stocks - Last Call by Jesse Felder via Tumblr

“Bond market risk appetites hold the key to the stock market right now. It is normally the case that equity and debt markets are very closely intertwined but today this true more than ever. And the bond market is signaling the party is nearly over.

I say that the relationship between bonds and stocks is more important today than ever because mergers and acquisitions activity and stock buybacks have been a major source of demand for equities over the past few years. And, to a very large degree, these have been financed by debt. So companies' ability to access the credit markets currently has a huge impact on stock prices."

Read Also: Bonds Are Sending Some Ominous Signs by Daniel Kruger via Bloomberg

2) Stocks Are 85% Above Long Term Trends by Doug Short via Advisor Perspectives

“The peak in 2000 marked an unprecedented 144% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 14% below trend briefly in March of 2009. But at the beginning of November 2015, it is 85% above trend, at the middle of the 77% to 93% range it has been hovering for the previous thirteen months. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1086 level.

Incidentally, the standard deviation for prices above and below trend is 40.6%. Here is a close-up of the regression values with the regression itself shown as the zero line. We've highlighted the standard deviations. We can see that the early 20th century real price peaks occurred at around the second deviation. Troughs prior to 2009 have been more than a standard deviation below trend. The peak in 2000 was well north of 3 deviations, and the 2007 peak was above the two deviations."

Read Also: Q4 Dividends Off To A Bad Start by Ironman via Political Calculations

3) The Fed's Communication Breakdown by Ken Rogoff via Project Syndicate

“Nothing describes the United States Federal Reserve's current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed's policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged "data-dependent." That sounds helpful until you realize that each of them seems to have a different interpretation of "data-dependent," to the point that its meaning seems to be 'gut personal instinct.'

In other words, the Fed's communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC's decision to exit near-zero interest rates. After all, even after the Fed does finally make the "gigantic" leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that. And I fear that we will continue to have no idea."

Read Also: China's Economy Is Worse Than You Think by Noah Smith via Bloomberg

But Also Read: I'll Eat My Hat If There Is A Global Recession by Ambrose Evans-Pritchard via The Telegraph

4) The 10-Things I Relearned In October by Doug Kass via TheStreet.com

1. Disasters have a way of not happening
2. Permabulls (and bears) are attention getters
3. Pay attention to investor sentiment at extremes
4. Market remains preoccupied with monetary policy
5. Quants rule - they move the markets up and down.
6. Greed vs Fear
7. Tech nearly always leads the markets
8. Perception vs Reality
9. The hardest trade is the best trade
10. Curse of the Billy Goat lives

Read Also: Why The S&P May Already Be in A Bear Market by Shawn Langlois

5) A Good Time To Hold Some Cash by Mohamed El-Erian via Financial Times

"Recent signals from the European Central Bank and the Federal Reserve have reignited talk of divergent monetary policies among the world's two most influential central banks.

The short-term implications for investors include a stronger dollar, greater equity market volatility and a wider trading range for key interest rate differentials. The longer-term consequences are up for grabs. Both suggest investors should revisit conventional wisdom that dismisses cash as a 'wasting asset' in their portfolios."

Read Also: Is The U.S. Entering A Recession by Charlie Bilello via Pension Partners

Other Reading

• Everything You Need To Know About Apples Cash Pile by Matt Phillips via Quartz
• The Coming Middle Class Tax Increase by Robert Samuelson via Real Clear Markets
• Investor Letter - 5 Major Market Fears by Dan Loeb via Third Point
• The Difference Between Real & Academic Investing by Ben Carlson via A Wealth Of Common Sense
• The Absurd Claims Of Keynesian Economics by Scott Sumner via The Money Illusion
• 9 Habits Of Influential People by Travis Bradberry via Forbes
• The Trinity Portfolio by Meb Faber via Faber Research
• Visualizing Where Money Is Made In America by Tyler Durden via ZeroHedge

“Risk taking is necessary for large success, but also necessary for large failure.” – Nasim Taleb

Have a great weekend.