Archive - Oct 3, 2009 - Blog entry

How well has the Federal Reserve performed?

Let's take a look...

Reports from FHFA show they are rolling over tons of dead mortgages. What's the objective? To buy some time.

Back in early March, Steve Leuthold told investors to "buy stocks now or you'll regret it". He was absolutely right then and I think he's right now. Forget retesting the March lows, the stock market is heading higher. He is now calling for the Standard & Poor’s 500 Index to jump to 1,350 next year as the economy recovers from the worst contraction since the Great Depression.

For the first time since March, the stock market actually showed a little reaction to reality based information. As it turns out, even removing any hint of stimulus will cause the market to retreat. We already expected the cash for clunkers program was largely a gimmick with auto sales dropping like a stone in the last reading. Home sales are being artificially juiced by the $8,000 tax credit and the Federal Reserve keeping 30 year mortgages near historical lows. You can expect that if the Fed and the tax credit were removed we would see a similar reaction as the cash for clunkers program in the housing market. It is amazing that so much energy and focus is being put on bailouts, gimmicks, and transient market forces all the while ignoring one major component. Jobs.

Want to know why the giant, insolvent banks aren't being broken up?

Here's why...

Inflation or deflation? Round 1 goes to ... deflation.