This page has been archived and commenting is disabled.
Can Stocks Rally Without the Fed Juicing the Market?
I keep
hearing how stocks are due for a huge rally and that technically the market is
in a great position. Certainly we could see a brief bounce here as we have
major support from March lows.
However, all
of this seems to ignore the fact that QE 2 is ending. And anyone who believes
the market has healthy demand without
the Fed juicing the system needs to rethink the last 3+ years of market action.
In plain
terms, we have not had a period in which the Fed wasn’t pumping tens of
billions into the markets since 2007. Indeed, the only time the Fed wasn’t officially pumping its brains out was
between the end of QE 1 (April 2010) and the announcement of QE lite (August
2010).
However,
despite the formal declaration that
QE 1 was over, the Fed DID continue to pump north of $10-20 billion into the
markets every month, ALWAYS during options expiration week (this is pure coincidence
of course).
So the
notion that QE 2 will end and the stock market will stay afloat just fine is
questionable to say the least. And it’s clear that investors still haven’t digested the fact that QE
3 isn’t coming anytime soon.
This will
end soon.
The Fed’s
next FOMC meeting is next week on June 21-22. If the Fed doesn’t hint at or suggest it might add additional liquidity
(either QE 3 or some version of Operation Twist as Rosenberg and Gross have
suggested recently) you can expect to see stocks drop in a BIG way,
On that
note, if you’ve not taken steps to prepare for a stock market collapse, you
NEED To download my FREE report devoted to showing in painstaking detail how to
protect yourself and your portfolio when the stock market goes South.
I call it The
Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth
of information about portfolio protection, which investments to own, which to
avoid, and how to take out Catastrophe Insurance on the stock market (this
“insurance” paid out triple digit gains in the Autumn of 2008).
Again, this
is all 100% FREE. To pick up your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
Good
Investing!
Graham
Summers
PS. We also
offer a FREE Special Report on the inflation situation in the US. This other
FREE Special Report, The Inflationary
Disaster explains not only why inflation is here now, why the Fed is
powerless to stop it, and three investments that absolutely EXPLODE as a result
of this.
All in all
its 14 pages contain a literal treasure trove of information on how to take
steps to prepare AND profit from what’s to come. And it’s all 100% FREE.
To pick up
your copy today, go to http://www.gainspainscapital.com
and click on FREE REPORTS.
- advertisements -
We've been in "financial crisis round II" now for at least six months, the time I've been on ZH.
Is this the round of the long count? I'm beginning to lose my breath!
the short answer is yes, the market can and will continue to rise.we know this because the private sector also has a part in monetization. (create a dollars worth of debt and you just created a dollars worth of spending) you must accept this axiom, prior to the 2008 crash the private sector was creating money faster than the Fed, and the Fed lost control. now there is some doubt as to how vibrant the private debt market is, and will that market take up the slack when the Fed steps away. there is also a question, will the Fed step away, having seen this problem get away from them before, will they let it happen again?)
The answers seem obvious when they are not. the Fed may want to keep a tight lid on private debt creation, and debt demand is largely government spending. if by privatizing tese government services, we can accomplish a handoff from Fed debt to private debt, that would solve the issue, at least in theory. the Fed doesn't have the authority, and its not certain how privatizing government services would alter the political landscape. the Fed wants to maintain control over the money supply, but they need to stand aside and allow private debt creation, however there is no private debt solution for government spending, unless that spending is made discretionary.
abolish the public education system, the library system, the government run military, and security. (this process is underway). the question right now is how much control does the Fed have over debt creation, how much are they willing to give up, and how far have we come in the process of privatizing the public sector spending, and therefore public debt.
I love this guy. He is one of the best financial newsletter copy-writers of all time. I wish his forecasts were as good as his prose.
Well, just everybody has been saying that it is the gdsob fed injections which had been
rsponsible for the market advance.
Fed has not stopped injecting, yet the markets have now been in a sustained decline. What will happen when the fed stops - we then trade higher?
couldnt have said it any better myself! all these sheeple that have been smokin hopium are gonna be in for a rude awakening. I find it absolutely hilarious how these imbeciles even question if the market will rally when interest rates spike(inevitable after june 30). These people are brain dead and have/cannot grasp concepts of economics. I hope they loose everything....
Is it possible for the FED to institute QE3 without alerting the investing public? Something completely hidden. Are they mandated to release information on every action they take? I ask because, the perfect scenario for the FED would be to institute a big stealth QE3 at the end of June in order to manipulate the psycology of the market into thinking that stocks are rallying without QE3. More people would then be converted to the thought of the economy slowly rebounding, Obama's policies are working slowly but surely, Keynesian ponzirific policies are ok, yada, yada, yada. That would cause more retail investors to jump in and propel stocks higher. It would be a false optimism, but to TPTB and TBTF banks, perception is reality.
All the idiots are in bonds and cash, so no, I don't think markets will rally without juicing. At least they won't til bonds start tanking and the dollar and I.O.U.'s lose the confidence they still somehow command. When that happens equities will become a hedge along with commodities and anything real and solid.
He said "Market," heh heh, heh heh.
My take is that there will be another rally (possibly a big one) contingent on the Greek bullshit ...
there is plenty of money ready to come out of bonds into equities and commodities ...
we'll see!
For the time being China is still willing to prop up its customers ... not for long ... this fall might be interesting
The scary part is most of us are with dumb money in regard to stock market allocation.
This might have been the post qe2 correction anticipated early. Now it is time for the winter rally early maybe, but we still have to ge through October.
That's a no, and many of us are relying on that assumption this Summer.
Do you have a 99.9% free package?
It hasn't fully stopped yet and the slow slide is now already going on for 7 weeks.
Once the QE stops, we'll be sliding at a average of 0,5 to 1% a day untill august or a earlier QE3.
And what when QE3 stops?
Debts will be higher again, capitalisme will be a memory and the dollar death.
QE4, QE5, QE6 and a WAR to end it all.
The war started 10 years ago with Afghanistan. Now look - its a full scale operation, with 5+ fronts and masave support infrastructure.
Come on Flannel monster.
It is Friday. Lighten up. Eat, drink, and be merry. Toke some weed.
No, I do not think stocks will rally into autumn without outside inertia.
A rally carrying no buying volume is a rally having "bitch-collapse" written all over it, and that's exactly what this QE2-driven rally from Setp/10 to March/11 was. If no QE/PPT support then see ya at 10,000 pts. It's that simple.
Do you take Diners Club?