Bloomberg Writes: BlackRock’s Fink Says There Are ‘Bubble-Like Markets Again’

 

BlackRock Inc. (BLK) Chief Executive Officer Laurence D. Fink, whose company is the world’s largest money manager with $4.1 trillion in assets, said Federal Reserve policy is contributing to “bubble-like markets.”

“It’s imperative that the Fed begins to taper,” Fink said today at a panel discussion in Chicago, referring to the central bank’s $85 billion in monthly bond purchases. “We’ve seen real bubble-like markets again. We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.”

“We have issues of an overzealous market again,” Fink said at the event, which was sponsored by the Paulson Institute and the University of Chicago Institute of Politics. 

He is of course absolutely right. The markets have been distorted by the FED to an amazing degree. The situation is truly unprecedented as we have never seen anything even close to that.

I would go even further and argue that we have backed ourselves into a corner from which no easy exit is possible. As I have mentioned before the velocity of $85 monthly QE is slowing down drastically as all of that money no longer has as much of a impact as it did in the past. Simply put, as the velocity slows down, the overall economy/markets follow and interest rates go higher. On the flip side, should the FED cut back by any amount (even a small one) the impact to the downside will be as described above, only much more severe. There is no easy answer, we will all have to suffer.

Not that I would know, but it is like going through a cocaine withdrawal. Your normal dose no longer has the kick, yet if you decrease the dose….withdrawal symptoms begin to show up.

Either way, only two outcomes are possible. Going through a withdrawal or ODing. Not a pretty picture for the US Economic future either way you look at it.   

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