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What Happens When the Markets Lose Life Support?

Phoenix Capital Research's picture




 

 

Stocks are on borrowed time.

 

The single item that has driven stock prices over the last four plus years (since the 2008 Crash) has been the Fed’s expansion of its balance sheet. David Rosenberg of Gluskin Sheff, depicted this fact beautifully in the chart below:

 

In plain terms, this chart shows us the Fed is driving stock prices. Virtually every dollar increase in the Fed’s balance sheet has resulted in stock market gains. Take away Fed stimulus and the market would be right back where it was in 2009: with the S&P 500 in the 600-700 range.

 

Thus, you can safely and factually say that the stock market is on life support from the Fed. Which is why any indication that the Fed will taper its QE program could result in a stock market crash.

 

The Fed tried hinting at tapering a month or so ago via a placed article at the Wall Street Journal. Everyone got into a panic and Bernanke and his pals quickly went into damage control mode assuring investors that QE could last forever.

 

Now the talk of QE tapering is spreading. Yesterday Steve Liesman on CNBC (another media personality with close ties to the Fed) stated that the Fed was having internal discussions about the effectiveness of QE.

 

Later that day, Goldman Sachs Chief Economist, Jan Hatzius, who has very close ties to NY Fed Present Bill Dudley, stated that the Fed may taper QE as early as September.

 

It is now clear that the Fed is trying to prepare the markets for a withdrawal or tapering of QE. Judging from yesterday’s sell off (yesterday was the FIRST down Tuesday this year), the market is beginning to realize that the party won’t be lasting much longer.

 

Given that ALL of the stock market gains since 2008 were based on Fed money printing… what do you think will happen when the Fed tries to taper QE?

 

For investment insight on preparing your portfolio for a market collapse, visit us at:

http://gainspainscapital.com/protect-your-portfolio/

 

Best Regards

Graham Summers

 

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Wed, 06/05/2013 - 17:54 | 3627740 MeelionDollerBogus
MeelionDollerBogus's picture

image Fail.

Sorry Phoenix but to rise from the ashes you have to make sure your published web content refers to server content not your own hard drive.

Wed, 06/05/2013 - 13:12 | 3626766 tradewithdave
tradewithdave's picture

Life support?  Oh yeah, I almost forgot.... corporations ARE people thanks to Citizens United and all.  Definitely... life support at all cost.  Save the corporations... Kill the whales... the London Whales.  By the way, has anybody seen Bruno's Facebook page?  Photos of him are tougher to find than that Van Praag laptop that turned up in a garbage room in downtown New York.  

 

Wed, 06/05/2013 - 11:36 | 3626420 quasimodo
quasimodo's picture

Another of those "meh" articles.........does he get paid everytime I click on these damn things? Good grief.

About as worthless as a rubber beak on a woodpecker

Wed, 06/05/2013 - 18:09 | 3627789 MeelionDollerBogus
Wed, 06/05/2013 - 11:53 | 3626468 astoriajoe
astoriajoe's picture

"About as worthless as a rubber beak on a woodpecker"

administration program for carpal tunnel syndrome in animal kingdom. totally legit.

Wed, 06/05/2013 - 11:30 | 3626402 Clowns on Acid
Clowns on Acid's picture

The Fed can stat tapering now. The TBTF banks have pulled in retail and IRA's into the equity market, while hedging their portfolios and can woithstand a down draft.

In 2007 they would be bankrupt as tghey were clearly caught doing coke in the bathroom. Today they are ready for it. Must clear the system and buy assets at much lower prices.

Wed, 06/05/2013 - 11:28 | 3626393 Meremortal
Meremortal's picture

Bernookie is grinning. He is getting just what he wants, a little fear in the market without doing a thing but talking.

This will only encourage him. 

 

Wed, 06/05/2013 - 11:26 | 3626383 AustrianJim
AustrianJim's picture

Nice chart.

Wed, 06/05/2013 - 12:22 | 3626547 Ying-Yang
Ying-Yang's picture

If you hear a voice within you say 'you cannot chart,' then by all means chart, and that voice will be silenced.

Vincent Van Gogh (amended)

Wed, 06/05/2013 - 11:38 | 3626423 quasimodo
quasimodo's picture

Put on your rose colored specs, then it really pops.

Wed, 06/05/2013 - 11:19 | 3626349 RaceToTheBottom
RaceToTheBottom's picture

What, earnings aren't going up?

Wed, 06/05/2013 - 11:14 | 3626335 ThisIsBob
ThisIsBob's picture

"Unchanged on the year?"  How could that really hurt anybody, he asks?

Wed, 06/05/2013 - 10:37 | 3626210 digitlman
digitlman's picture

This guy is great at stating the fucking obvious.

 

Buy gold, right Graham?  There...saved everybody some money.

Wed, 06/05/2013 - 10:37 | 3626208 shovelhead
shovelhead's picture

About the same thing that will happen to a plane @ 30,000 feet when it runs out of fuel...

The important difference between driving and flying.

Wed, 06/05/2013 - 10:36 | 3626203 semperfi
semperfi's picture

What happens to a crack head when you take away his pipe for 3 days?

Wed, 06/05/2013 - 10:32 | 3626198 Stuck on Zero
Stuck on Zero's picture

Markets, more or less, are dependent on the first derivative of money growth i.e. investments are made on the assumption of change.  That makes it impossible to "taper" money growth.  Collapse is the only recourse.

 

Wed, 06/05/2013 - 13:27 | 3626828 dontgoforit
dontgoforit's picture

I believe it is destined to crash anyway - QE 4evar or not.  And the last few days could be the beginning slide from the apex from which it tumbles.

Wed, 06/05/2013 - 10:28 | 3626181 LawsofPhysics
LawsofPhysics's picture

What happens?  the bad debt is finally cleared?  What, too optimistic?

Wed, 06/05/2013 - 10:33 | 3626199 Bearwagon
Bearwagon's picture

Well, it depends. I'd say that it's too optimistic to assume that the debt is finally cleared without any war.

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