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Jeremy Grantham: "The Fed Has Spent The Last 20 Years Manipulating The Stock Market"
To those who have read GMO's last letter bashing the Fed, "Night of the Living Fed", there will be little new in Jeremy Grantham's interview with Bartiromo to be aired later today. For those who haven't, the GMO strategist does a terrific summary of how the Fed's economic central planning (a function it should not have, and should merely focus on monetary policy) has destroyed the stock market: "The Fed has spent the last 15, 20 years manipulating the stock market. I think they know what they do has no direct impact on the economy, the only weapon they have is the so-called wealth effect: if you can drive the market up 50%, people feel richer, they feel a little more confident, and the academics reckon they spend about 3% of that. The problem is they know very well how to stimulate the market, but they step away when the market gathers steam, and resign any responsibility for moderating a bull market that may get out of control, and I fear that the market will continue to rise, it will be continuously speculative. As a consequence you get a boom and bust... I think the Fed should settle for just controlling the money supply, not controlling the economy." Unfortunately, it is now too late, and the Fed, which in addition to lender of last resort, is the economic "controller" of only resort, now that fiscal policy is moot, will soon have to be overthrown for its disastrous effect on the US economy to be finally eliminated.
Much more in the interview below.
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Shouldn't Mr. Grantham be wearing a tinfoil hat?
According to Karl Denniger? Yes he should. It all sounds like tin to him.
Because Denninger denies Fed market manipulation? Uh.. no. Try again.
He must be in disguise.
Given he talked about every other asset class except THAT YELLOW ONE THAT SHALL NOT BE NAMED BY MONETARISTS ON PAIN OF EXCRUCIATINGLY EMBARRASING AND PROLONGED DEATH, I would have to agree.
go to now ye rich men, weep and howl for your miseries that shall come upon you.your riches are corrupted,you have lived in pleasure and been wanton. this day a grievous sore of poverty hath been left on the doorstep of AMERICA,thou art declared to be ICHABOD.
behold a pale horse
I told that baptist, "Half a tab!"
I have no languages, but sometimes I speak in tongues.
(Vodka soaked watermelon, and couple of Ruskie girls will do that to you, and more;)
I would suggest he wears a Kevlar helmet and a Kevlar vest with ceramic plates.
Nothing at all tinfoil about his comments in that excellent interview. The guy has a history of being correct and what he says is pretty much what's said here and against most of the BS you hear on MSNBC. He doesn't suggest what _should_ be allowed to happen (expose the frauds, stop the phony mark-to-myth, take the bastards who caused this into receivership, prosecute and imprison if found guilty thousands in the financial sector), but he points out what I believe to be a proper path working within the system _such as it is_.
- hmm, I was just reading about this over at ;
http://www.enterprisecorruption.com/
"First off, your government made a promise to the corporate establishment not to obey law. Not to obey law FOR TWENTY YEARS. We are not talking “smartest guys in the room” and “conspiracy of fools” here. We are talking THE government. Granted.. it is very likely government had a darn good reason not to obey law.. and not to obey law for a good long time. But, then ask.. to what length would government have to go to ensure law.. is not obeyed.. to ensure the constitution is rendered void and null? What would a government have to do if the avoidance of the enforcement of law were threatened? Now that was a tongue twister. A government, no.. more importantly EVERY branch of government, would be compelled to seek out and eliminate truth, wherever and whenever truth (accidental or otherwise) threatened the government’s plan and the government’s “promise”. These would be the three branches that the schoolbooks told us were designed to avoid conflicts of interest. This would be the exact constitutional opposite of a government’s stated responsibility, promise and sworn oath to its citizenry."
AAPL revenues $400B? Will a billion people spend $1.10 per day on a device that makes phone calls, plays music and videos, and can be used to read books and magazines, and perhaps pay a small fee for some of that content. Could be.
Depends. Will it actually make a damn call? Can I squint hard enough to read on it? Do I want to hold my hand in the air for an hourlong video?
The holographic projection display system with a telepathic user interface enhanced by gesture based control should address your concerns. So too would hooking up to your TV or laptop.
Not a lot of additions are needed to make these things iGame compatible either.
Consumer electronics convergence.
AAPL is down 20 cents as the once mighty CSCO falls 15%. I've said this since Spring, AAPL is the market. If it's not going down, the market ain't collapsing any time soon. And from what I'm seeing with everyone and their brothers, mothers and sisters walking like zombies drooling over anything Apple, it'll be a long, long time before that happens.
And from what I'm seeing with everyone and their brothers, mothers and sisters walking like zombies drooling over anything Apple, it'll be a long, long time before that happens.
You realize, of course, that sentiment like that is exactly when bull markets end.
Nope. Bull market ends when/if Fed ever stops propping it up. And with our relationship with China, we can't allow that to happen, nor can the Chinese. It'll go on for a couple more decades before the real implosion happens and the game is up.
Think about it, if CSCO weren't down 15% today the market would be up. AAPL barely down, all the high p/e PCLN's of the world down a few pennies. If CSCO were down 5%, and that's a lot, the market would be flying high.
Check out this thought provoking story from Credit Writedowns:
http://www.creditwritedowns.com/2010/11/apple-is-still-screwing-it-up.html
Just imagine old world when your boss could not get hold of you 24/7, when music was not the most important in your life, nobody cared who were wearing what, who was fucking some silicon beauty somewhere in the bushes, when the cars were just means of transportation and so on. Could you?
I think at some point you will come back to earth and realize that you have bigger problems and you will have to deal with them.
The most important issue for you will be how to make some money to survive, and it won't come from selling services to each other (maybe for some time).
He must have read my memoir...
Wonder how that worked out for the investors in the Zimbabwe stock exchange? Just saying.... Price EVERYTHING in gold, nominal fiat pricing is a worthless measure.
I think the dow should be renamed the "wealth effect" index.
After all the world is all about buying the right "brand" these days.
its about time FED is shut down.
When will Jeremy Graham now get heart attacked?
"When will Jeremy Graham now get heart attacked?"
I think the bets are on where. I have "in the hot tub" and with " a lady that is not his wife".
Matt Simmons RIP
"I think we all should take a little step back, it seems to me we got a little bit ahead of everything, including, unfortunately, ourselves". IMHO this market is setting up for a huge drop, which will include just about every asset class, we cannot and will not go higher from here without a meaningful correction, should we, go higher, the fall/crash will be as much more severe, with all them nasty consequences! I am with you all on everything but I cannot escape this foul feeling I have in my stomach, for days now! All is not right but something is really strange!
I get the same feeling that something is not right. I am not sure but I think it has something to do with the fact that Bernanke is ignoring all of the Foreign Nations warnings and doing what ever he pleases no matter what. I think there will be huge ramifications, if not a World War III.
I am with you guys on "not feeling right." In fact, my blog posts the past two days have been:
There's Something Very Wrong and the Tea Party Knows It
and
Fed Plans Not Going So Smoothly; Harrisburg, PA on the Edge
While I may not be the brightest bulb in the box, I try to put the economic madness into some sort of meaningful form for ordinary people and have been chronicling economic events on a daily basis since 2006. It sometimes seems a hopeless cause, as I've been screaming "manipulation" for a long, consistent time, but Grantham's interview really made my day, as he's a respected authority, speaking the truth.
Markets are down again today and it just seems that without the direct injection of Fed money - and maybe even WITH it - the game seems to be nearing an end point. That may not be such a good thing in the short term, but I would truly love to go back to an economy and a stock market like the ones I grew up loving, circa. 1960s.
End the Fed. Mass arrests of bankers. Take back our nation. We really need to get motivated and mobilized or the oligarchy will steal what little is left.
Think gold and silver will save your soul? Either the government will eventually confiscate it or roving bands of outlaws will try to forcibly take it. Forget the butter, it's close to time for guns and bullets.
I said in my post yesterday that if the stock market doesn't go up and bond yields down when the Fed cranks up QE2, look out! The money is all going to the banks. BofA, JP Morgan, Wells and Citi are completely illiquid, insolvent and need to be taken down or out.
Our day of reckoning is closer than many people want to believe, IMO.
Right on! It's not right. In fact, it is all wrong and the tsunami is just off shore.
First there is the great unwind; economic collapse, followed by hyperinflation and then war.
Now you must change your moniker to Toxic Tide!
Goldman just flashed they're closing GM order book 3 days early, I've maintained the GM IPO is holding this market up, so it's the 15th Monday when it might sell off.
I think the problem is that the FED has taken contol over the Country. They have neutered the President, the Congress and the Senate. All of this control is in one mans hands, who is not elected by the People he controls. This in my opinion is very much like a Dictatorship. This one man can take from Americans thru Taxation and give to whoever he wants. This is not the way a Democracy is supposed to be run.
It is a Republic... if you can keep it.
It was a Republic... and we lost it.
+10 - We are entering the Imperial phase, just like Rome. Look at the pomp and cost to have the boy emperor visit India. If that wasn't a top I don't know what is. The Empire is on "Thin Ice". Los zetas surely are barbarians at the gate. The only thing missing is a legion coming home and marching on DC.
Lucius Cornelius Sulla here...
On a site with some of the most clever user names, yours .. well what can I say brilliant.
Its all part of the plan...Sheeple
Much like the Lira story of the 80% sufferers.
Why, when it is public knowledge that the FED is a PRIVATE ENTITY (loud enough), should they be controlling anything at all?
He says the Fed should be controlling the money supply!!
Nuts. Till someone like him has the guts to actually call a spade a spade, we'll wander in this lie-lie land, asleep at the wheel.
Quite disgusting actually. All the big guys toe the party line and leak and speak that which is allowed only.
ORI
http://aadivaahan.wordpress.com
On another note the FED is like a Credit Card given to every Citizen that they have to make payments on. Yet, they have no control on what is charged on their Credit Card. The FED decides what they will spend the Money on. Foreign Governments need money, charge it, Banks need money charge it.
It is no wonder Americans are angry. Who would not be when one man at the FED can charge whatever he wants on your credit card and then make you pay for it. If you do not want to pay for it then they have the IRS which can take all of your assets and put you in Jail. Yes, that is a Democracy all right.
Ron Paul should bring in Grantham to testify before Congress in round one of the Financial Services Committee vs. Bernanke.
What is the difference between monetary policy and central planning, or at least central planning of interest rates, and hence finance, capital formation, savings (or lack thereof), risk taking, determining where capital goes, etc.?
is he short or something? why so fearful? i don't agree with what the fed is doing but if i found a bag of money laying in the street i'm gonna take it. heck, i even bother to pick up a penny.
Hey, he argues against the Fed using monitary policy as a tool for impacting the economy via the weak "academic" link to the stock market, but notes that while QE's don't attack the root problems in the real economy, they will drive ES. He sees fair S&P value at 950, but will not be surprised to see it go to 1500 in "a couple years." This he sees, however, as a bubble and, as a conservative guy, he doesn't avidly embrace it. By 1500, he expects another bust . . . but knows it could happen before then. Hence his caution.
He doesn't say not to play, only that he's not a player. He acknowledges it looks good for speculators. He's guardedly bullish about EM's and miners.
He doesn't like bubbles because the net cost once they pop is greater than the cumulative gains along the way. And, of particular concern to him now, are the losses faced by retirees with zero yields--at a time when they would be consuming/stimulating the economy--as well as the corner the Fed will have painted itself into when another crash comes and interest rates are already at zero.
i just finished the interview. man is this guy good. a must watch in my opinion.
i couldn't edit my previous post or i would have junked myself by deleting it
He doesn't like bubbles because the net cost once they pop is greater than the cumulative gains along the way
And therein lies the rub; anybody and everybody with savings is effectively being forced to speculate. Even if you sit it out, you are losing purchasing power. I refused to buy RE during the bubble because I knew it was a credit bubble that would end badly. But I still end up picking up the tab for speculators vis a vie government intervention. Same thing is happening here. Even if you stay out of the casino, you will be forced to pay.
I feel your pain. Sarcasm on:
"Thanks for saving your money to bail out the people who splurged. You might as well feel good that it is being put to some use. before inflation makes it worthless within 3 years time.
When that happens you'll have nothing. But at least you won't be like the speculators with LNG trucks, Silos of Grain, rail cars full of coal, and barrells of crude all cluttering up the yard of those McMansions you paid for.
You are Welcome!"
Grantham was touting a version of this in early 2007. http://www.bloomberg.com/apps/news?pid=newsarchive&refer=columnist_pesek&sid=axjQJ8._t2Dk
Damn, and he was right.
...why did you get junked for that?
The FED is/was a bank, close it.
Ok, so how does one control the money supply without reproducing similar problems?
His suggestion... Government hires all the unemployed? What? He's spot on about bubbles... but his solution is more centralized power, when the cause was centralized power over money supply? He sounds like an anti-Fed socialist.
He was referring to unemployment compensation and the need for "stimulation" in a climate where increased profits are only leading to increased salaries, options and bonuses for executives rather than hiring of labor.
Common sense really. If government is going to pay people, then get something tangible for the cost. He did address the "crowding out" issue, btw.
Clear thinking sugggestions if we're gonna pay anything. Hire the semi skilled to repair collapsing infrastructure, insulate, lower energy use, create other energy production and transportation systems. We don't have to have "government workers" do this. Too bad we're way too corrupt, waited too long along the peak oil thread, spent lots of money and oil on unwinnable low return wars, and helped bankers loot what's left.
If Benji is IGNORING the rest of the world, and the potential consequences of that action (currency wars, trade wars, World Wars, etc.), what does he see over the horizon. Bernanke is not stupid. He is a student of history, and he can integrate multidimensional variables. His actions are either extremely irresponsible (extremely unlikely), or he is trying to prevent an EOW (end of world) event for the US, and consequently the financial world. Not an optimal solution...
Naw, Ben's just too proud to admit all his academic papers are completely wrong. It's all ego with a shot of prime dealers abusing him because he's a twerp.
Exactly, his entire premise about the FED causing the Great Depression can easily be refuted. It was a speculative credit bubble which followed economically disruptive technological innovations. It can just as easily be argued that government intervention prolonged the bust ... just as it is now.
When reinflation meets a rate hike, everybody goes back to square one.
FED should stick to clearing checks and making sure there is enough liquidity in the market for transactional finance.
FED is a private bank...which politically climbing young attorney general wants to sue the FED for market manipulation, insider trading (via non equal information) and lack of transparency?
someone, anyone? You don't have to win, you will still be a hero. But sorry, no more coke and hookers...trade offs ya know
Do you guys really believe in this drivel? I respect Jeremy Grantham and GMO but he and his fund have benefited from the Fed's actions over the years, making him one of the wealthiest investors alive. So please Mr. Grantham, while I respect you, save these diatribes against the Fed for the fickle masses. The reality is the Fed isn't going to be overthrown, Rand Paul will hit a brick wall in his attempt to audit the Fed, and the banksters will continue making a shitload of money trading risk assets. So save the emotional bs for your clients, I am here to make money and I'm buying every major dip from here on. PERIOD.
"Do you guys really believe in this drivel" Yours or his? That's right Leo, all of us on this site only care about money. We could give a shit about our country, our kids, our future and our self respect. Pretty hypocritical comment Kolivakis
Wake up DJ!! Your country is fine, all you need is to implement a taxation system like the rest of the G7 to bring down your debt and inequality.
Exclamation points are not points of logic. How do taxes imprison criminals? Fix corruption? Remember those history books and how, at the end of the empire, they were taxin the shit out of their own and how, out of disgust, even though the place was collapsing, the people would fight, refuse and hide? Just human nature.
What diatribe? Did you watch the interview, Leo?
German response to media propaganda and lies:
http://axisoflogic.com/artman/publish/Article_61620.shtml
Great article. Protesters overcome 15,000 policemen--the largest police force ever assembled in world history.
Many police officers also expressed sympathy with the protestors’ aims.
We have lost faith in the government until they prove that their politics is for the people and not for the corporations.“
WHAT A GREAT STORY!
Wow. My brother was an exchange student in Stutggart in the eighties. Things have changed.
We call timeout for our union mandated shift change.
"if you can drive the market up 50%, people feel richer, they feel a little more confident, and the academics reckon they spend about 3% of that"
Trickle down my ass. Works this well (horribly) in every other way too.
Gee good to know they don't push the propaganda of trickle down, the disease only dumbasses can catch, and meanwhile know themselves internally a 50 percent rise in ones stocks, will result in 1/16th of it being spent. Just like tax cuts. They don't create jobs. Good job fed. Good job s(t)up(id)ply siders.
That firmly places the 'u' in suck, don't it?
This guy is not right; he is not wrong, but he is also not right.
Wonderful.
Was it tyler derden talked with a face mask of Jeremy Grantham?
"Economics is too important to be left to economists, government is not safely left to politicians, law to lawyers, education to educators, or information to journalists." -
Economists are in the constant scholar’s danger of over-refining their material to a pile of fine dust, learning more and more about less and less until they know everything about nothing. - "dying of money".
Unemployment is not just a number, and a lot people with their children are suffering. Gas at $3 plus causes a lot pain in the remote areas where driving is the only option. A lousy dentist can only damage one tooth, a lousy surgeon can only hurt one patient, a lousy general can only lose one battle. A lousy economist in power causes suffering of millions and millions of innocent people.
An imbalance between rich and poor is the oldest and most fatal ailment of all republics.
– Plutarch
When the going gets weird, the weird turn pro.
- Hunter S. Thompson
Take it from an aging baby-boomer. Most of my generation preferred the fantasy of self-adoration fostered by both corporations and governments to the responsibilities required for informed participation in the political process.
And both government and corporations like it that way…
It takes frequent thought and involvement in issues that you can effect to learn the skills of citizenship.
While the elites won’t be inviting you in… you can always just crash the party… you just need the tools to open the door.
Capability ENABLES Responsibility…
Why Politics MUST be Localized
http://culturalengineer.blogspot.com/2010/10/why-politics-must-be-localized.html
Empowering the Commons: The Dedicated Account (Part I)
http://culturalengineer.blogspot.com/2010/08/empowering-commons-dedicated-account.html
Patent granted. I’d love to put it into operation.
Developing a capable electorate involves much more than any single innovation can satisfy... however some innovations act as catalysts for greater change. This is just such a catalyst. While it may seem paradoxical... this is a lever which in time will (I believe) REDUCE the amount of money in politics, LOWER the costs of campaigns, AND lead to the development of a more responsible electorate.
A call for USEFUL financial innovation...
Go to source>>With respect, this guy is not right; he is not wrong, but he is also not right.
Hey, I'll take whatever good efforts I can. Improvement is to be welcomed!
Great interview. I enjoyed it. Suprising for "tout tv".
Thanks Zerohedge for sifting through the bullshit to find the gems. I can't watch CNBS anymore, my wife is tired of me yelling "bullshit" at the TV.
well its ,one two three ,why arent we fighting more?
tell you what i dont give a damn, soon we'll all be eating spam
five six seven oh fuck it
Excellent interview. Well worth the time.
I agree. Grantham has an excellent track record and it's easy to see why. He is very thoughtful and sees the big picture. His views on the Fed should get noticed - he has a lot of credibility.
Me too. Great interview and a nice review of his investment record over the last ten years or so. It's all about the macro these days and Grantham's been one of the best global asset allocators around.
Gotta love the stern headmaster presence too: I told you what to do, you wouldn't listen and buggered everything up anyway. Now look at the mess you've made!
I've always liked Grantham. I think he is a man of integrity.
on the subject of "20 years"
http://www.enterprisecorruption.com/
r
He says to put the construction workers back to work caulking windows. Does he not realize homebuilders (here in SoCal) made all those profits with up to 60% illegal labor? So all the Mexicans get these jobs? Without policing it, many will come back from Mexico or Texas or Central Valley agriculture and underbid legal labor.
Grantham is one of the sane real people left in this world that understands cause and effect.
Nice break from the corrupt business/politcal cheerleaders paraded on the media daily. Now back to Cramer!
I was about to post this interview on my blog until assclown started babbling about how congress needs to engage in job creation.
You'd think this guy would have figured out by now that government can not create jobs, it can only (on net) destroy them.
I think this guy is 50% rational and 50% nuts.
Everyone please remember: THE "CRAZY GUYS" WERE RIGHT... AGAIN!
Wow, some common sense. Shocking.
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