The Biggest Lie in Finance Today

Phoenix Capital Research's picture

So it’s all
about stocks?

 

Our esteemed
Fed Chairman, now claims that QE has helped by raising stock prices. That was
never a reason he listed for launching QE before. In fact, this is the first time
he’s even mentioned this as a benefit (though everyone with a thinking brain
knows that the Fed doesn’t give a hoot for anyone other than Wall Street which
is why ALL of its moves were intended to help them juice the markets).

 

Why is he
suddenly saying this?

 

It’s simple,
because the market has proved he’s either incompetent or a liar (likely both)
when it comes to QE. After all, he repeatedly said the reason we needed it was
to boost employment and lower interest rates.

 

Well, 7.3
million people have lost their jobs since the Bear Stearns collapse. The Fed
claims that this number would have been a lot worse without QE. It’s a pretty
brilliant argument considering that there is no alternate universe where the
Fed didn’t employ QE to compare to,
so there is literally no evidence that refutes the Fed’s claim.

 

However, the
fact remains that we spent over $2 trillion and still lost 7.3 million jobs.
Hard to see the success rate of that policy. And given that the only folks
hiring and raising salaries and bonuses right now are Wall Street firms, it’s
pretty clear which demographic QE has TRUTHFULLY benefitted from an economic
perspective.

 

As for QE
keeping interest rates low, like I said, Bernanke is either incompetent or a
liar. Given the abysmal performance QE has had in containing interest rates,
I’d say it’s both:

 

 

As you can
see, interest rates have soared BOTH times the Fed implemented a new QE
program. On top of this, we now have direct evidence that the Fed’s policies
are

actually killing people... literally.

 

In case
you’ve missed it, food riots are spreading throughout the developing world
Already Tunisia, Algeria, Oman, and even Laos are experiencing riots and
protests due to soaring food prices. 

 

As Abdolreza
Abbassian, chief economist at the UN’s Food and Agriculture Organization (FAO),
put it, “We are entering a danger
territory.”

 

Indeed,
these situations left people literally starving… AND dead from the riots.

 

And why is
this happening?

 

A perfect
storm of increased demand, bad harvests from key exporters (Argentina, Russia,
Australia and Canada, but most of all, the Fed’s money pumping. If you don’t
believe me, have a look at the below chart:

 

 

As you can
see, it wasn’t until the Fed announced its QE lite program that agricultural
commodities exploded above long-term resistance. And in case there was any
doubt, QE 2 sent them absolutely stratospheric.

 

In light of
all of this, it’s no surprise that Bernanke is now fishing for any
justification for his insane policies. However, even his claim that QE has
pushed stocks higher is a big fat lie as MOST of stocks’ gains have been a
direct result of inflation or decreased purchasing power.

 

Indeed, in
nominal terms, stocks have rallied 91% since their March 2009 low. However,
when you account for Dollar devaluation by pricing stocks in Gold, you  find that nearly two thirds of stocks’
gains have come as a result of the US Dollar lowing purchasing power. Put
another way, stocks have only rallied 31% since their March 2009 in REAL terms.

 

 

And it looks
as though stocks are about to drop even MORE in real terms.

 

 

As you can
see, stocks have outperformed Gold since December. However, priced in Gold
they’ve recently been rejected at long-term resistance. to 0.925 if not 0.90
(meaning Gold would greatly outperform stocks on a relative basis).

 

Indeed,
while I think stocks are more than overdue for a correction, I view the latest
pullbacks in Gold (and Silver) as MAJOR buying opportunities for both inflation
hedges.

 

Let’s be
blunt, the Fed is going to do one thing and one thing only: print money. And
while stocks might benefit somewhat from this, inflation hedges like Gold and
Silver will positively EXPLODE higher.

 

After all,
while stocks are up only 31% in REAL terms, Gold has soared 58% while Silver
has more than DOUBLED. One can only imagine the returns investors will see in
the coming years as the world’s central banks (lead by the Fed) print us into
oblivion.

 

Good
Investing!

 

Graham
Summers

 

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You can
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