Is The Fed Trying to Stop A "Market" That Has Gotten Ahead of Itself?

StalingradandPoorski's picture

A few years ago, you were laughed at for calling the stock market a bubble. Now everyone, even the financial mainstream media is calling it a bubble and continuing to openly promote it. A few years ago, you were laughed at for saying that the monetary policy experiments that the Fed and every other central bank embarked on would be a failure, and would not lead to any growth and only reinflate the previous Fed induced asset bubbles. Even former Dallas Fed President Richard Fisher called QE "a massive gift for the rich" because they are the only ones to have benefited from it.  Now everyone, even the financial mainstream media and politicians are openly agreeing on that fact, with talk of record income inequality all the rage.

So where are we now? Well, nothing has changed. Markets continue to surge to new record highs on a daily basis, all on hope, while growth remains MIA. PE ratios are at levels not seen since 1929, the Dot com boom, and 2007. Volatility is at record lows. It has been 100 days since the "market" has had a 1% drop. Complacency continues to reign supreme. And, as we have seen, everytime markets have dropped (ie brexit etc), the Fed and every central bank stepped in with either verbal or actual intervention to prop stocks back up. Meanwhile in the last few years, you were also made fun of if you said stock prices were the Fed's true mandate. Then as time has it, even Minneapolis Fed President admitted that the Fed has a third mandate and it's financial stability. But in the same speech he went on to say " we are keeping our eyes open for asset prices to try to look for signs of bubbles.....very hard to see asset bubbles in advance." Which of course, is a complete load of shit. In 1999, Alan Greenspan uttered the following: "bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgement that hundreds of thousands of informed investors have it all wrong. Betting against the markets is usually precarious at best." It is truly funny because it has been Fed policies in the last 20 years that have led to 3 bubbles. Stanley Fischer even set up a bubble spotting team in 2014 to "spot asset price bubbles", but we haven't heard anything since then. Yellen even gave up on talking about asset valuations, saying in December " I do not want to comment on stock prices", which was funny because on multiple occasions in the past her comments/warnings fell on deaf ears.

So here we are, 8+ years since the last crisis, where we had rates at or near zero with only 2 rate hikes in that time (since 2006), with new reinflated asset bubbles across the map (houses, cars, stocks, art etc.) Then a strange thing happened. February 22nd FOMC minutes were released, where they said some noteworthy things, but nothing new. The FOMC even commented on the "low levels of implied volatility" saying the equity markets appeared "inconsistent with the uncertainty attending the outlook for such policy initiatives" But, after the release, March Rate Hike odds dropped briefly below 40% and remained around there. The markets didn't care about the normal bullshit talk from the FOMC about "gradual" rate hikes. Then this week came, and we have had 4 Fed officals come out and talk up a March rate hike (Brainard, Kaplan, Harker, Williams, & Dudley). March Rate hike odds exploded, sending odds of a March hike to 80%. So what gives? The only thing that even makes remote sense is that the Fed has realized stocks have gone up way too fast, and are trying to slow it down. But is it working? Nope. Trump gave an address to congress last night, and that sent stocks, and global stocks, to new record highs, even though nothing new was promised. As previously mentioned in previous posts, the Fed created the Frankenstein market, and now the monster they have created is not listening. Markets will probably continue to surge higher on hope, and even if it does drop, market participents know that no matter what, central banks have their backs....until they don't. The next few weeks will be interesting, as the March FOMC meeting slowly approaches. Meanwhile, continue buying stocks, DOW 36,000 here we come!

 

 

 

 

 

 


 

 

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Dr_Lucid's picture

What we are seeing with the CB's is a risk risk off move where they are re-allocating their ballasts from oil and currency....to US equities.  So think about how much money is sloshing around in the derivative, oil and currency markets and then imagine that a large portion of that has a hard on for SPY. 

 

gregga777's picture

The sole, true mandate of Goldman Sachs' Feral Reserve System is to make the rich richer, by stealing from the poor and middle class, thereby greatly increasing income and wealth inequality. Any muppets, er, I mean suckers, er, whatever, that did not not lose everything in the bursting of the previous two bubbles are scheduled for pauperization in the upcoming planned bursting of the third Feral Reserve System boom-bust cycle this century. The Feral Reserve System criminals are extremely proficient at enriching their obscenely rich masters. They will lie to anyone and everyone about their true purposes observing but their actions shows all that anyone needs to understand their evil purposes.

gm_general's picture

And another thing - suppose you lived next to Vesuvius - do you think if the people every day get up and each declare "This is the day it erupts!" that it will as a result never erupt? Studies on past bubbles showed that news talk of a bubble INCREASED towards the actual blow up, not that it decreased or was nonexistent.

gm_general's picture

It's like one of those experiments where 4 guys are plants and giving the wrong answer to a question. The fifth guy is the test subject and not in on the ruse. In many cases he will also give the wrong answer despite him knowing better. Except in this case there are no plants, just stupid people leading the herd off a cliff.

Aussiekiwi's picture

It is not a Bubble that is ready to pop if everyone thinks it is a bubble, the danger time will be when optimism reigns again and the same people are defending the market heights as being completely rational based upon fundamentals.

Grandad Grumps's picture

The question to ask is "Why have they done what they have done?" Look at the end goal, work backwards and then consider who benefits ... besides the elitist useful idiots. The implication is that there is a larger agenda... but who's?

To believe it was an experiment or hapinchance is idiotic.

Buck Johnson's picture

I have to agree with you, they aren't idiots they could easily have stopped any type of market issue but they didn't.  There is an an agenda and I've been wondering myself.  I've heard some say this is being done to take down the US.  I've heard others say this is being done to take down the EU.  Another was they are trying to depopulate the planet etc. etc. etc..

Whatever their plan is, is to weaken the planet economically and forment war.

Macavity's picture

Unrivalled power (ie independent Central Banks) will always achieve its goals.

To answer your question:  combine two things, accelerating upwards wealth transfer (ie economic theft, fraud and graft) and flogging overvalued assets with what TPTB buy with all that money...the world, foreign natural resources, foreign lands, your mortgages, monopolies everywhere.  Ah.  Fucking parasitic asshats.

bobsmith5's picture

None of the major global markets have any connection whatsoever to the real state of the world's economy.  We are living in the largest financial bubble the world has ever known and there is no cure short of a total monetary meltdown and reset.  It was designed that way and is intrinsic to the system so that a total collapse is unavoidable at some point somewhere in the future, but no one knows exactly when.  Not even it's central banking designers know the day nor the hour. 

amanfromMars's picture

Well, well, well ......... Who'd have athunk it so easy to lead fools in a folly to disaster?

 

amanfromMars 1 The 2 Mar 10:42 [1703021042] ….. still chatting on https://forums.theregister.co.uk/forum/1/2017/03/02/china_international_strategy_of_cooperation_on_cyberspace/

 

Re: Nice Try

 

Hmmm? 

 

Spin an IntelAIgent Yarn with Remote Autonomous Command and Secret Intelligence Servering Control of Future Event Programs which can all be discovered and uncovered to be true and not fiction, is a much simpler route for root access into every admin system/SCADA operation, SVV. 

 

The current running disaster being the spinning of yarns lacking intelligence and without Remote Autonomous Command and Secret Intelligence Servering Control of Future Event Programs which can all be discovered and uncovered to be true and non fiction.

Macavity's picture

Was that English?  or Martian?

amanfromMars's picture

Was that English?  or Martian? ...... Macavity

It and they were all fact and facts, which is virtually Chinese to fake news organisations, Macavity. And heading headlong into the mainstream via alternative memes and means. 

Surely you cannot be expecting the future to be anything like the past and the present. That would be akin to stagnation and petrification of a dynamic body ..... and most unnatural ...... and therefore quite perverse and corrupt.

BigFatUglyBubble's picture

Pull the pin, you sociopaths.

MalteseFalcon's picture

The market "got ahead of itself" 5 years ago.

A political decision was made to pump the market.

Rate increases now are political decisions designed to tank the market.

Can we stop using the word "market"?