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Oops! Bear Market Over (Not)
In a wonderful piece of financial engineering, the Federal Reserve has reduced the duration of the recent bear market to 36 hours.
On Tuesday, the Federal Reserve announced that it would keep monetary policy accommodative for 2 years. Investors cheered the move lifting the Dow Jones Industrials more than 400 points. “We believe in Ben!” was heard on the airwaves and in the blogosphere.
The Fed’s move was inspired by the rapidly weakening economy, but investors overlooked this fact. They were just happy to be reassured that Uncle Ben would never allow asset prices to fall. Investors also seem to overlook the fact that the prior round of asset purchases did little to improve the economy and the same medicine was being prescribed again! Bernanke was heard muttering, “We have to do something”.
Nonetheless, investors breathed a collective sigh of relief. The stock market, that great barometer of all that is good and bad, has voted. Federal Reserve policy must be good – the Dow is up 400 points (in 5 minutes no less). You cannot beat that?
Furthermore, the bear market that I have been calling for has been completely undone. How great is that? We can have rising stock prices and excessive speculation, and may be the economy will catch on. Or is the stock market the economy? Oh, that is a theory for another day. Rising asset prices, spurred on by easy money, creating something called the “wealth effect”. That theory didn’t work out too well last time as all that “wealth” went into commodities. Ahh, who cares about all that. Investors don’t have to worry as their 401K’s and IRA’s will remain “safe”.
Now let’s get real folks. While investors are conditioned to never “fight the Fed”, there is little the Fed can do to stem the current economic malaise. Investors seem to have forgotten 2000 to 2002 when rates were lowered from 5% to near zero. The economy still faltered and by gosh, so did the stock market. Furthermore, like any dope addict, any additional increases in medicines seem to have less and less effect over time. The patient (i.e., the economy in this case) becomes more resistant to interventions. “Fighting the Fed” may be a good idea in this case.
Despite Tuesday’s strong showing and the expected response by the Federal Reserve, the market still remains vulnerable. The price structure – that path price takes – still suggests bear market. The major indices are in the process of making a lower low (on the weekly charts), and this by definition is a down trend. There will be opportunities to go long or play that counter trend trade, and that should be in a couple of weeks.
And as far as financial engineering is concerned, the Fed has not come up with a way to reduce the duration of bear markets. This should be a disappointment to investors.
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more bears
less seals...
Today's beatdown is more selective. I show a lot of green amongst the blood on what I am watching.
There is buying in MLP's and in some income/divvy shares of CEF's and equities. Even muni bond CEF's are green.
I guess that means the algo's are off this AM and letting pickers pick?
A South Korean stock broker jumped to his death from a high-rise office amid worldwide market turmoil.
The 48-year-old broker, identified only as "Seo," sent text messages to colleagues expressing regret over severe losses, just minutes before leaping to his death Wednesday in the city of Daegu, according to Chief investigator Lee Kang-ho.
Lee said Seo's text messages included an apology to his clients. The messages said prices of the stocks owned by his clients nosedived and he felt sorry, a Daegu police spokesman told AFP. No separate suicide note was found.
Police said CCTV footage showed the man coming out of an elevator alone on the 18th floor of the building before he was found dead on the ground.
South Korean stocks have been especially volatile amid global financial turmoil sparked by fears the U.S. and European economies could be headed for recession.
That is terrible. Who gets the finger pointed at them on this? The JPM and CDS's? Central planners for trying to engineer a market? Obumhole for, well, just because he is Obumhole.
Manic manipulated markets.
A single death is a tragedy, a million deaths is a statistic.
--Joseph Stalin
Jamie Dimon moving in for the kill. CNBS is deep throating his shit and will swallow live on Sham-WoW TV. OMFG !!! He just said Bernack is doing a great job... You be know'n he is the next chairsatan 4 sure...