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The Fed Signals the Music Will Stop Before 2014
After the market’s close on Friday, Jon Hilsenrath at the Wall Street Journal released an article implying that the Fed might remove or reduce its QE programs before the year end.
The reason this matters is because Hilsenrath is thought to be an unofficial mouthpiece for the Fed. Time and again he’s released articles hinting at the Fed’s future policies in advance. And many believe senior Fed officials such as Bernanke will personally leak ideas to him to test the public’s response to said ideas in advance.
So many believe that Hilsenrath’s Friday article was indeed the Fed preparing the markets for a tapering or removal of QE before the year end. Given that the entire US market is moving lockstep with Fed activity (the Fed’s balance sheet has literally reflated the NYSE tick for tick post 2009) this is a huge deal.
This supports our view that the Fed is aware stocks are in a bubble and is attempting to prep the market in advance for less liquidity.
Since QE 2, the negative effects of QE (higher costs of living) have outweighed the positive effects (higher stock prices) by a wide margin. Only 52% of US households own stocks… but everyone is paying for higher food and higher energy prices.
On a deeper level, QE is a drug for the market. There is no evidence in history that QE creates jobs or growth Both Japan and the UK have launched QE equal to over 20% of their GDP, neither have experienced a significant pickup in jobs or GDP growth as a result.
So QE was always about one thing only: pushing the market higher. But now the market is completely detached from economic realities. There is a word for this… it’s “bubble.”
The Fed knows this and is now trying to prepare the market for withdrawal. But the market is on total life support from the Fed. Take away the Fed punchbowl and the party stops.
Between this, rampant insider selling (makes you wonder if the people running the companies know something about the economy the Fed is ignoring), the downturn in economic data in the US, and the ongoing disaster that is the US jobs market, the market is priced for a total collapse.
For more market commentary and investment insights www.gainspainscapital.com
Best Regards,
Graham Summers
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Great business if you can get it!
All fine and good if wages keep up with those prices and the things being bought and sold are in the "official" market. Show me where federal tax reciepts are going up significantly because I don't see it, especially with more states and cities requiring bailouts shortly. I call bullshit.
It's federal, not state or municipal. Seems pretty straightforward.
Doesn't matter what the FED says, and shortly what the FED does won't matter much either. Keep an eye on their private jets. When they all prep them at once we'll know its over.
Either FED prints till FIAT implodes or FED stops printing and FIAT implodes...really the world should have thought twice about trusting the US$. Anyway it's a commodity for commodity world out there bitches and paper money simply facilitates trade. Commodsaregold.
Stopping QE equates to default. You can tell a liar because their lips are always moving. Listen to what you want but please find something better to post on ZH, I can go to Msnbs and read shit like this,
Exactly right. Reminds me of those who said Greece would default.
Greece *did* default. It was called "private sector involvement."
It's the big boys -- Italy, Spain, and (yes) France -- who can't be allowed to get anywhere close to that.
Ok; think this one through. Forever is a long, long time. QE'ever? After say $50 trillion, who's gonna play? The end of this has to come; it's as inevitable as the end of the world....hmmm - weird & biblical one blog poster said. Good way to describe it. It can't go on QE'ever.
the music will not stop..
It will only change from organ grinder music to a dirge.
Wall Street to BBernanke:
"[icy] Nothing stops. Nothing... or you will do the hardest time there is. No more protection from the guards. I'll pull you out of that one-bunk Hilton and cast you down with the Sodomites. You'll think you've been fucked by a train! And the library? Gone... sealed off, brick-by-brick. We'll have us a little book barbecue in the yard. They'll see the flames for miles. We'll dance around it like wild Injuns! You understand me? Catching my drift?... Or am I being obtuse? Give him another month to think about it."
Bernanke accidently went to the wrong college classroom. He thought it was Econ 2 but it was Con Law 2. So he studied freedom of the press and learned to apply it as Fed Chair Puppet.
The music may stop. The presses won't.