timing is everything

BusinessWeek Writes: Thanking the Fed, Reservedly, for Investors’ Bounty

Don’t look at me like that—Walgreen (WAG) went full-yuletide in August. In any case, should you find yourself looking at your 401(k) for the first time since the Subprime Swoon, be Thanksgivingukkah-grateful for the extraordinary largesse of this Federal Reserve.

Thanks to outgoing Fed Chairmen Ben Bernanke and the nominee to replace him, Janet Yellen, and their colleagues taking down interest rates to near-zero five years ago and keeping them there—on top of the Fed’s nearly $4 trillion of creative asset purchases—investors have enjoyed the restoration of more than $13 trillion in U.S. equity market value. That’s called multiplier effect. And it’s also called remorse, if you were one of the record numbers who bolted stocks altogether and are scrambling to get back in now, after indexes have more than doubled. It’s also called financial repression if you’re a saver having to eat negative real rates on your hard-earned cash.

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I have no words. You have got to be f#&*$ kidding me. I don’t know how many times I have to say this, but thanking Bernanke or the FED would be equivalent to thanking your drug dealer for getting you hooked on crack cocaine, or thanking a hooker for giving you AIDS or thanking God for helping you get home again while driving drunk.

All of these things might feel good at the moment, but they will eventually catch up and kill you. What most people do not understand is that by pumping a tremendous amount of money into the economy over the last 2 decades, the FED has created bubble after bubble in various asset classes. All while undermining the overall economy.

The stimulus works great until it doesn’t work anymore. We are at that point. With massive amounts of credit flooding the system, the velocity of that money is having less and less impact. When the tide turns, there will be hell to pay not only for the people who are directly involved in the scheme, but for everyone. Not only for the US Economy, but now for the global economy. Everyone.

The sad part is, all of this was preventable is we had the fortitude to stick to sound economic principals. Instead we have a bunch of whack jobs on every level of our government whose sole purpose is to max out our credit cards and kick the can down the road. The upcoming bear market of 2014-2017 will make all of this very clear.

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Bloomberg Writes: The Fed’s ‘No Taper’ Sparks a Trading Frenzy

The Federal Reserve surprised nearly everyone today when its Open Market Committee announced at 2 p.m. that it would not taper its $85 billion in monthly bond purchases because it is concerned about weakness in the economy. The announcement led to an across-the-board rally as investors hurried to plow money into stocks and commodities.

The market reaction was instantaneous: According to data off my Bloomberg terminal, between 1:59 p.m. and 2:00 p.m., the Dow Jones Industrial Average jumped 141 points, from 15,485 to 15,626. Over the next two and a half hours, the Dow added another 50 points to close up 147 points on the day.

On a more serious note, while the market and most people celebrate I see it from a different perspective. While most market participants see it as “The Fed will not taper $85 Billion per month stimulus” I see it as “The Fed CANNOT taper $85 Billion per month stimulus”.

There is a significant difference between these two statements. You see, Ben Bernanke and the Fed understand that if they stop the QE bond purchasing program the following things will happen within a short period of time.

Interest rates will shoot up.

Dollar will strengthen.

Deflation will finally be evident.

Stock market will collapse.

Real estate market and auto sales will collapse.

The US Economy will tank.

They do not want to allow that to happen for obvious reasons. However, the laws of physics cannot be bypassed. Sooner or later all of the things above will happen irregardless of what the Fed does.

I do find it troubling that the market only went up 150 points or so. That is a fairly weak performance considering what has happened. In no uncertain terms the FED told everyone that it will keep this credit financed speculation party going for as long as possible.

The biggest mistake I think everyone is making is the fact that they believe the FED has control of the markets. That is not even close to reality. They do not control anything. Don’t be surprised if the market reverses tomorrow and begins its next let down.

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