This page has been archived and commenting is disabled.
Pop Quiz: What's Behind The Remarkable Rally In US Equities?
*Please have your #2 pencils ready, and feel free to use the words "US Government" and "Federal Reserve" interchangeably...
A) The US government is intervening in the equity markets to positively affect consumer sentiment and force a "quicker" economic recovery that may not have taken place in this time frame should the equity market languish for another year or so.
B) The US government is forcing markets higher in order to erase the past 2 years market crash from the psyche of the American investor by producing the biggest bull run in market history....in order to counter balance the 2008/2009 market slide they must create an equally significant bull run in order to preserve the perceived soundness of the equity markets as a safe investment vehicle over the long run...for if the equity market becomes perceived as an extremely risky investment vehicle with enormous downside risk and the ability to erase huge sums of wealth, it raises borrowing costs for corporate america as companies can not tap the capital markets to raise cash at reasonable prices due to insufficient market liquidity, and therefore the brunt of debt financing falls on the bond markets which may "crowd out" the US governments ability to borrow at reasonable rates.
C) The US government is forcing equity markets higher in order to create sufficient capital inflows into the Treasury market when US bond prices inevitably collapse
D) The US government is forcing equity markets higher to "pay off" one of our creditors who may have begun voicing concerns over our ability to finance our debt loads.
E) Concerns over the EUs ability to sustain itself as a viable entity is forcing capital out of the Eurozone and into the US as a safe haven allocation until european concerns subside.
F) The US government wants to make it abundantly clear that you should never even think of shorting US equities ever again.
G) The US government has sent out a memo to all major US investment firms informing them of their intent on taking the markets to new highs in order to offset any real estate losses sitting on their books.
H) The US government is creating an air of euphoria surrounding equities in order to create enough liquidity to continue unloading their equity/warrant positions at reasonable prices....ie the ultimate pump and dump
I) The market is pricing in a V-shaped recovery predicated on the fact that no one has to pay their mortgages anymore which means corporate profits are going to the moon...duh!
J) Bubble Ben is giving us free money, stop asking questions and go buy something!
K) All of the Above
L) None of the Above (Add Your Own Hypothesis)
»
- advertisements -
L, L and L. Besides even if any of the option from A to J were correct, it doesn't explain how it was done and that's the caveat.
Also, don't ignore the global financial markets. All you're options are focuses on the US equities but ALL markets have rallied. Why? Big collusion between CB's? I doubt it.
My guess is that the crash of late '07 to early '09 had something to do with settling an enormous position between large investment firms/governments/CB's deep in the market and god knows who (we all know about the $quadrillion CDS's still floating out there). Now that it's settled, it's back to the business of perpetual market appreciation. Money doesn't just evaporate. It's all out there somewhere.
L) The collapse has only been suspended by cooking the books. Now we wait for the Treserve to stop the music so that mass starvation can begin: The Greatest Leap Forward.
Gov't meddling always, always, always leads to starvation.
L) The market is now 80% machines. Machines, much like terminator, have no fear, they are only programmed for greed.
A market absent fear is this.
How about Jim Cramer is right. America is now a lean, mean profit producing industrial machine. The Apple ipad will lead us into a new era of tech wonders that will reshape the world and insure America keeps it's spot at the head of the economic table. Boooo Yaaa!
Just kidding of course. "We are all doomed", Dr. Marc Faber. I believe in the Bernanke put theory, he will do every thing he can to pump up the market. We may see Dow 100,000, but a Happy Meal will cost you $100.00. "Printing" their way out is the only way to avoid default. Keep manipulating CPI to the point where there is "no inflation" (don't count food and energy), and pay obligations in worth less dollars.
How about, "the fed is giving the oligarchy one last chance to get out of u.s. equities at a higher price."
J is the answer. There's no use in anthropomorphizing the 'government' into a monolithic personality which aims to satisfy its 'wants' and 'needs' with its machinations. This is the standard launching pad for silliness, and it never makes you any money.
Its J because easy money causes bubbles in one or more varieties of equity investments (tech stocks, real property, oil futures, emerging markets, solar stocks, tulip bulbs, etc). This is simply because easy money -- free liquidity -- always initially seeks risk. Losses have few ultimate consequences when you're playing with borrowed money, and the potential upsides are huge. This risk-seeking flow of liquidity causes a momentum trade in risk assets which is noticed by other market participants who use their easy money to buy the chart, sending it higher and higher.
This is symptom of easy money. Hard-won money is quite different; much more conservative.
Once the early investors are in, the bubbles are promoted, rationalized, and go hyperbolic for a short time, then they blow up. Happens every single time, and this time is no different. There's a reason why the market takes its cues from Ben & Co. As soon as they start tightening, the party is soon to come to an end.
Or at least that's how I see it. Though I think this bubble is still in its early stages, I'm not playing the long side with many chips. I've learned this lesson the hard way. Bubbles will trade to cause the maximum pain to the greatest number of market participants and most of what you think you know is totally wrong. Just look at the silly thing Fed Chairmen say in the middle of bubbles. They have the greatest real-time economic models in the world. And if they were trading on their own advice, theyd be broke, too.
Just an Illusion!
http://www.youtube.com/watch?v=21VbKgOM0gg
L) Alien invaders installed a sleeper cell in our gubmint. Their intent on destroying civilization on this world. I have seen TG's alien profile and it ain't pretty.
P.S. Did anyone notice that the only time we got a 9% pull back was when Bernankie was waiting to be Reconfirmed. When his Confirmation was in question the Market Tanked. Was that a Threat to Congress? Confirm me or I will Tank the Market.
With the total control of the Market it makes me wonder if "they" were the ones that took the Market down. With the 2008 meltdown it allowed all of the Big Banks which are part of the Federal Reserve get even Bigger. It allowed them to Buy their competitors for pennies on the Dollar.
Now every Big Bank has an Investment Bank and a Mortgage Company Bank of America has Merill Lynch and Country Wide, JPMorgan has Merill Lynch and Country Wide, JPMorgan now has Bear Stearns and Washington Mutual.
Plus, they got Billions from the Taxpayers.
I also think that the Fed has Billions invested in the Market and cannot afford to allow it to go down. The Fed is used to stability and the only way to maintain that stability in the Market is to continue to pump Money in if it starts to go down.
The problem is that from my perspective, the FED and the Government has taken control of the entire United States Economy. Think about it FED - GOV Ownes AIG (Largest Insurance Co in the World), FRE, FNM (which owns 50% of the Mortgages in the United States), C (which is one of the Worlds Largest Banks), Options in other Banks, GM, Chrysler (almost all of the Auto Makers in the United States), and in my opinion at least 50% of the Stock Market even if it is in S&P Futures. . There is no Free Market just more FED and Government control.
I have been saying it for a while...when this thing ends, it is going to stop on a dime and fall off a cliff. It will be like pulling the plug on a carnival and letting freddy loose. Everyone will try to hit the door all at once, no one will get out, everyone gets quite a bit more than a haircut. You cannot sustain a major economy on persistant unemployment, corporate and investor uncertainty, and low consumer spending coupled with that initial hint of inflation. The clock is ticking.
The answer is K. Most definately.
My top choices are (not in any particular order):
Wiccans
Voodoo
Aliens
The Fed
How can they sustain this? The moment they stop proppring it up will be the moment it goes free fall. Ironically in keeping gold down they make it attractive.
When the punch bowl runs dry and the STHF and people pull out their money looking for somewhere totally safe to put it....
The hope must have been that they will only have to keep pumping until the world economy takes off again. But Greece, Portugal, Ireland, Spain, UK.... that hope is seemingly a long way off and China has to watch its infaltion and bubbles.
They have the tiger by the tail and may have to wait until it dies of old age.
There will be NO safe place to put it! Dollars worthless, retirement funds garnished into some new kind of worthless gov't retirement bonds, deflation will push the shiny, shiny down, only to be confiscated again by the gov't at a later date...
All you can do is pay off your debt with the soon to be worthless dollars and spend all you savings now on things that you will need 5 and 10 years out. The VAT will be a killa and of course, the gov't will make a grab at your guns...
With the new healthcare, they can quickly eradicate the baby boomer generation with denial of medical services. This is the total confiscation of wealth, which has started... game, set, match!
I don't think I am going to like the "new normal" and it will not end well.....
And another 4 mens' stupidity.
Clinton, R.Rubin, Dubya and Barry O.
And all for 4 mens' vanity.
Bernanke, H.Paulson, Geithner, Greenspan.
Bernanke will never back down, he will twist the facts 'til eternity.
He has to be removed.
Barry, when history said it was your turn, did you stand up or just cross your legs and clench that sphincter?
"L," because it is the American way. We aren't who we are if our markets aren't going up.
BTW, its nice to see that some corners of America still want to go to the moon.
Alternative hypothesis is that the govt is boosting pension assets now so that they can "lock in" all the private and public pension funding at a comfortably solvent level, so that they can then nationalise all of the pension assets by calling them into the Treasury and issuing Pension Annuity Bonds Liquid Upon Maturity (PABLUM) to all the faithful who still expect their pensions to pay off.
Alternative-Alternative hypothesis is that the star gate that is under the Gulf of Aden opened up in the morning and mysterious rays are driving capital flows toward the US from both sides of the world.
Spot on! Unless they bail out the pensioners, they will have a bloody revolution on their hands. The Gov't takes over ALL retirement vehicles including 401k's and throw everyone in the same mosh pit...
And we know that this will NOT end well.
Maybe one of those 'unreality bubbles' encountered by Red Dwarf where the perception of reality is totally changed for everyone.
What else could explain a moon shot market when the world seems to be slowly dissolving?
simpler question -
K) Fed ?
all of the above plus a few more. TOTAL MANIPULATION. 37 of 40 days up up up up.
Complete BS. Wait around same thing in 2000 same thing in 2007.
Before you start guessing about the equity markets, you need to understrand what else is moving in the same direction. The answer would be... just about all risk assets.
The Fed has adopted ZIRP as a means to discourage short-term riskless saving, and encourage borrow for those who can visit the Fed window.
At the same time, the Fed could enginner longer-term Treasury lower and purchase MBS to help rescue the mortgage market... though mark-to-whatever had to be done.
Most essential to the equity markets was that algo buying of SPs and targeted short squeezing would create enough demand to allow the most troubled firms a change to bolster their own balance sheets-- in case things falter. And it allows the opportunity for the USG to get out of their own newly inherited messes.
So yeah, whatever those letters represent...
The FED is not the government, but they control the monetary system therefore they are the boss with no accountability and plausible deniability. They inflated the market to increase the confidence in the market and the U.S.. Without this confidence the whole system would implode.
I think it has started to backfire on them and work against them. They have pumped it so much that it is even unbelievable to the brainwashed masses. Also remember BB is determined not to let this recession look like the Great Depression, thus the phobia of a double dip to be avoided at all costs. If the confidence is gone the market will plummet and so will the economy. Personally I don't think it needed to be this blatant, and maybe it would be just a little more believable, not that I agree with this strategy.
Your almost right....where you're wrong....The masses don't have a fuc$king clue bro, not a clue. Everything else your right on.
I didn't say they were going to get off their asses and do something, but more of them are skeptical of the market and economic recovery. Even the mainstream media has had to acknowledge some of the scam.
soon, the masses will begin to wonder what that pounding sensation is....
I choose A,B,C,D,F,G,H,I, and J
E is a little far fetched...
"Us Government" and/or "Federal Reserve" must inflate the equities markets for many reasons including the two below:
Regardless of what the ruling elite and the media tell and/or lie to us, the situation continue to deteriorate because the causes of the financial/economic crisis have not been addressed.
as inflation takes hold market may surprize to up side ..zillions of fake fins flowing from fancy foot folly.
uhm professor is it ok if i only have a #3 pencil...
i'll go with K for $1,000 Alex
The US stock markets could be acting as a hedge against the uncertainy in Europe. It is also rising due to the good earnings reports being released, and the apparent mild recovery taking place in the US economy. Whether or not this is being fueled by govt stimulas is another issue, but either way it is what it is.
For (L) I would say
L) The federal gov't is looking down the barrel of massive defaults in state pension funds, many of which are heavily vested in stocks, and decided that, along with reasons A) through K), there were just too many benefits to providing the 'invisible hand' reach-around currently getting a rise out of Wall St.
Exhibit a: http://blogs.courant.com/capitol_watch/2010/02/state-pension-fund-reboun...
I think this is one of the primary reasons, the Federal government would be obligated to bail out these funds anyway. What is interesting is I imagine they were heavily invested in retail stocks and REITs, basically all those stocks that are rocketing. It is not beyond the realms of possibility that some of the HFTs are programmed to feed specific holdings through when they ramp up and squeeze the shorts.
I also agree with (B), the banks know their money making machine collapses if retail investors wake up and realize how risky equities actually are. Frankly, as a credit person, I find it astonishing how bad the returns on equities are given the subordinated nature of risk, but if the little guy leaves this market, the banks will have nobody to play with.
I think your close to it.
The big trading houses are co-ordinating w/ each other (heck, their computers could be completely synced and running a single algo for all we know) and are using the big pension money to run this thing up a bit... the low volume makes this possible
They are trying to draw the regular folks back to the market. As the regular folks start to enter again, the big boys will ease out, and once clear they will stop the manipulation and let the market find its true value. Then they'll re-enter at the bottom.
the ultimate answer is to inflate to the point where the >100k/per year/per person of debt that the next generation will inherit will seem as chicken feed.
And their 50K household income will buy 100 lbs of rice and a gallon of cooking oil.
Got to get the average family above 250k so Barry the Obamanator can fleece them for the benefit of the parasites.
It MUST be on its last legs...
DX index is now at 82.03. We've been waiting more than a year for this artificial rally to end and conditions now bear closer-than-ever resemblance to those of September 2008:
---GOLD is holding its own even as dollar rises vs. Euro. Two weeks ago, after the latest acute phase of the Greek thing erupted, gold detached somewhat from closely tracking the dollar. Now moving much more independently. Every correction is repaired price-wise quickly and the metal is acting as a CURRENCY.
---Credit is tightening.
---Savings are being drawn down, spent.
---Bond yields have more-or-less ceased falling.
---Volatility is increasing.
NOT counting on reality to sink in, but I really HOPE to see a plunging market coupled with a flight to safety in precious metals and oil. Instead of REITs, retailers, restaurants and the paper dollar...
Now, we really need an extraneous geo-political event or financial failure to set it off...
They're going to keep the DXY between 80 and 85 for the foreseeable future by rotating through strength/weakness in the EUR, JPY, CHF and the GBP.
I wouldn't hold my breath waiting for something to happen here, if I were you.
:D
CD's dynamite charge on a mountain full of precariously perched snow, full of potential energy, interlaced with weakness, like a trigger itching to be pulled.
An example of a rare executive order.......with positive results
Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.
When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.
You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!
You are a den of vipers and thieves.
"You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out."
- Andrew Jackson upon evicting from the Oval Office a delegation of international bankers. 1862
Where are the patriots when they are needed most?
Thanks for the reminder of what a true statesman can do!
Artificially patching up pension liabilities improves company balance sheets and relieves future liabilities.
Good supposition. Boosting pension assets now will allow the Govt to "lock in" pension funding at a comfortably solvent level, so that they can then nationalise all of the pension assets by calling them into the Treasury and issuing Pension Annuity Bonds Liquid Upon Maturity (PABLUM) to all the faithful who still expect their pensions to pay off.
I vote for none of the above. I don't think they wanted to inflate the stock market but cannot figure out how to keep interest rates low without doing that. I think we give the Fed way too much credit for being devious (smart) when they are not. The government is always good for unintended consequences, which is why most of their programs fail miserably.
Bubble Ben's crystal clear policy: REFLATE RISK ASSETS AT ALL COST AND AVOID DEFLATION!
Groucho sez:
"And we all know that doesn't end well..."