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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)
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How about the "there-is-no-hope-of-yield-anywhere-else-and-we-lost-so-much-money-in-2008-so-let's-just-chase-whatever-skirt-is-moving-UP" theory?
Survey sez:
"H"
Agree. Thats why they're called the sell side.
How about the "None of the above" choice?
Why is the Federal Reserve not mentioned in any of the choices?
How about this:
K:) The Fed creates money out of nothing and then gives it to it's friends who buy stuff with it.
Oh noes, it means INFLATION.
The US govt is the FED ..same thing
Q: Why is the Federal Reserve not mentioned in any of the choices?
A: "feel free to use the words "Us Government" and "Federal Reserve" interchangeably..."
This was added after my comment, as well as several other new choices.
keep on them.
Except that the FED isn't part of "government". Its owned by the banks in general and the Wall Street banks in particular.
Whereas the government is owned by...
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
- Napoleon Bonaparte, 1815
You bet big AL, no more federal than federal express....
Oh-oh...! That would be MONETIZATION, wouldn't it? They promised they wouldn't DO that...
That is my assumption. Don't fight the Fed.
I really, really dont understand this.
If history has been clear on one thing, it is exactly this: ALWAYS bet against the fed.
1998: Same response today as to Asian crisis. Result? Nasdaq crash, shedding 80% peak to trough.
2008: Same response today as to Nasdaq crash (which was the result of same response as today to Asian crisis). Result? Not only the stock market crash of 2008, but MUCH more importantly, an economic expansion in 2003 through 2007 that for the first time in US history FAILED to create more jobs in the upturn than were lost in the downturn. Repeat, first time ever.
2010: Same response as today as to Housing and Credit collapse (which was result of Nasdaq crash, which was result of Asian crisis). Whatever crazy shit people on TV want to say, this recovery PALES in comparison to the recovery in 2003, and that recovery did not entail the creation of a $13 trillion deficit nor the tripling of the Fed balance sheet.
So, the relevant starting point comparions between now and 2003:
Interest rates: 0% today, 1% then.
Unemployment: 10% today, 4.5% then.
Credit: Front end of largest credit bubble in history then, contracting now.
Taxes: Were cut then, are going through the roof now.
Dont fight the Fed??? If you bet against the Fed every time since 1998 has been a HOMERUN and the starting point now is MATERIALLY worse than ANY of those points.