Guest Post: The Fed Cannot Stave Off The Inevitable Market Revaluation

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

The Fed Cannot Stave Off the Inevitable Market Revaluation 

The Fed has yet to learn that you can't fool Mother Nature for very long, but it's about to get a punishing lesson.

Did the Federal Reserve's QE2 program last year simply push the inevitable stock market decline forward a few months? It would seem so. In Remind Us Again Why Anyone Should Own Stocks For the Next Two Years (August 3, 2011) and The Junkie in the Pool and False Idols: Faith in Wall Street and The Fed Has Has Eroded (August 10, 2011) I included a chart of the current S&P 500 plotted against the two Great Bear Markets of last century, the Great Depression-era Dow Jones Industrial Average (1929 crash) and the Nikkei stock market from 1989.

It certainly looked like all the Fed accomplished with its $600 billion QE2 was stave off the inevitable by a few months:

Courtesy of The Chart Store, here is more evidence that the Fed just pushed the day of reckoning forward a few months: the first charts the current NASDAQ market plotted over the Great Depression Dow, and the second plots the current NASDAQ over the post-1989 Nikkei market.

The similarity of the two Bear market progressions is uncanny. As Ron Greiss of the Chart Store notes on the chart, "Did QE2 prevent nature from pursuing its intended course?" Judging by the recent "unexpected" cascade in stock valuations, it seems the Fed has yet to learn that you can't fool Mother Nature for very long:

Once again it looks like the Fed's attempt to stave off the inevitable crash in stock market valuations was temporary rather than permanent:

This week we see the same game plan being worked once again: smash the U.S. dollar and juice the risk trade, as if the inevitable recalibration with reality can be staved off forever. Judging by these three charts, that recalibration will take about another two years.

Perhaps when the stock market reaches its inevitable (i.e. unmanipulated) true value some time in 2013, then the Fed's attempts to fool Mother Nature will be seen for what they are: catastrophic failures.

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Sow-puncher's picture

Market collapse, Bitchez!

Waffen's picture

~sigh~ 2013.. tell me that means Dec. 2011, cause I am sick of waiting.

SheepDog-One's picture

Dont worry, it wont be nearly that long, not with Obama warning of impending large scale terrorist attacks, and Obamas lead economist Krugman pining for an 'alien invasion world war.

These things arent offhanded remarks, theyre code warnings to people who have ears to hear.

Remember, remember, the 11th of September....

Syrin's picture

Funny you should say that.   I try not to be a conspiracy theorist, but Obamugabe's statement got my attention because it is SO out of character to what he usually says.   It's almost as if it's the validation code signalling a sleeper cell to become active.

Snidley Whipsnae's picture

The azz hats have one lever that is partially broken: Interest rate lever only works in 'down' position...

...and one lever that still works in both modes; money printing lever works in 'stop' and 'go'...Unfortunately, they have jammed the money printing lever to 'ludicrous Speed' and are leaving it there... regardless of what they say...

After all, they are now at the point of playing for one more day at a time... Their long term, medium term and short term plans all focus on Tomorrow...

IOWs... they are scared shitless...


SheepDog-One's picture

Yep theyre just going day to day now.

Smiddywesson's picture

Absolutely, everything they do is to just survive one more day, except of course, their purchases of gold.

The reason they don't attempt to fix the system is they know it is unfixable, so they are buying gold and delaying the inevitable.

Horatius Stormcrow's picture

The printing presses can still be bumped up to "Plaid".  Hold on to your butts, folks!  Weee!!!!!

my puppy for prez's picture

Yes....false flag imminent.  But it is a SMALL scale "lone wolf" that they (including Big Sis Jan and Barry) are "worried about"!  Hmmm....

It was super of that "nice young Norwegian man" to give a video tutorial to the US patsy who will do it here....of course, it WILL be a "right-wing, anti-gov, tea party christian who opposes illegal immigration, abortion, the FED, and gun control"...oh, and stocking up on emergency provisions is suspect, too!  They have already said those things in their public warning pamphlets to surplus stores, motels, farm supply, etc.

Look for something like this to happen on dates that have '11' or multiples is an important # to globalist control freak sickos! 

Waffen's picture

Honestly I just dont know.  Love him or hate him, thanks to Alex Jones and ones like him, the False Flag meme is almost mainstream.  TPTB will have to be very careful how they do it, because the people will be watching and questioning like never before.


Of course a suitcase nuke is like an I WIN button for TPTB, the sheep simply wont fathom the depravity it would take a government to do that to its own people.

my puppy for prez's picture

Well, I wasn't going to mention InfoWars IS "out there" to many.  I go there daily, but I use my judgement and read many other sources, too.  The comments there are just hysterical, too....everything from "we are in for a Harmonic Convergence" to "I'm just gittin' my guns and ammo ready for those MF's".  Gotta love the variety!

Maybe a suitcase nuke...but I kind of think they will have to use what would be common for a "domestic terrorist" to use.....hence, a 'copycat' of Breivek.  That way, the feds could say, "See?  This is a copycat attack!  We must now rachet down a bit more 'to protect our citizens'..."  They have been conditioning through the media for a long time to expect a homegrown terrorist eventually.  So very Goebbels of them! 

Shirley Wilfahrt's picture

DUnno.....but seems like that is way overkill....all that clean up....unless were talking Newark...then nobody would notice.

I think nothing on that scale is small low tech "dirty" bomb in the right place would bring the markets to their knees....smoke detectors and black powder....that way all those damn ammo reloaders could be shut down afterwards...

If they are real smart it will happen in DC...upwind of capitol bldgs of course....the terrorist was on his way when it went off....silly terrorists....good thing nobody was seriously hurt....



my puppy for prez's picture

Or 11-11-11.  Wouldn't THAT be cute?  They think the repetition of numbers exponentiates their power.  Not that I believe that.....but THEY do.

LawsofPhysics's picture

But, but, the VIX is down?  Please give me something to trade here.  What is the options trade on this?

BeerGoggles's picture

QE3 is coming, just BTFD. You bears will never learn.

snowball777's picture

Finish the case of Schlitz before you're struck with a moment of clarity.

Cognitive Dissonance's picture

I'm a Pabst Blue Ribbon man myself. Then again, there's no accounting for (the lack of) taste. :)

Dr. Richard Head's picture

PBR?  You would be better off drinking Coors and then pissing it into a PBR can.  : )

Cognitive Dissonance's picture

Old habits die hard and I started real early.

CD working on an early drunk

CD working on his third of the morning. Thank God mom and dad stopped putting nipples on the can and just let me chug-a-lug.

Vic Vinegar's picture

Holy cow man.  That was good.

When some of us spacemonkeys say it's still good to have you in the comments section we mean this.

Cognitive Dissonance's picture

I am a deeply disturbed man. And I have my most fun in the general comment section where I can let me hair down a bit and just play around while trying to be somewhat topical.

So thank you. :)

StychoKiller's picture

Colorado Koolaid (Coors) is all well and good, but I prefer Ales (Tooth Sheaf Stout FTW!)

anynonmous's picture

I was too but ever since the mouse in the can (dead) it's tap water for me

fuu's picture

Quit talking about my mother.


Side not, I love that dshort chart.

Cognitive Dissonance's picture

The Fed has yet to learn that you can't fool Mother Nature for very long, but it's about to get a punishing lesson.

It is not about learning or not learning. It is about power and the exercise of that power. Consider the Fed to be a sovereign nation and the perspective becomes clearer.

Dr. Richard Head's picture

DAMN. The Vatican with an unlimited supply of toner.  That is heavy really.

Spastica Rex's picture

We live in a post-Enlightenment world. Meet your new priests, same as the old priests.

Dr. Richard Head's picture

In the name of the father, the son, and I'll fuck you in the ass - Lloyd Blankfien

Smiddywesson's picture

Exactly, the market isn't going to teach the Fed anything at all.  That should be apparent after last week.  Every 600 point loss will be met with more than enough money to erase those losses.  The Fed isn't going to run out of money because the money isn't real.  This market is going nowhere until the game of kicking the can and slowly acquiring gold comes to an end.  The things that could bring that about are:

  1. Uncontrolable rioting everywhere, especially in the US where the heart of the conspiracy exists.
  2. Gold or silver go vertical
  3. The COMEX blows up
  4. The central banks that matter agree that they all have enough gold to keep the banking system solvent.  Ditto for govenment coffers, but who really cares about the government?  They will do what they are told.
snowball777's picture


Existing or lasting only a short time; short-lived or temporary: "the disorder of his life: the succession of cities, of transitory loves" (Carson McCullers). [Middle English transitorie, from Old French transitoire, from Late Latin trnsitrius, from Latin, having a passageway, from trnsitus, passage; see transit.]
my puppy for prez's picture

I REALLY prefer "tranitoire" makes the demise seem so CLASSY!

buzzsaw99's picture

stocks = short bus to school

entendance's picture

Fed's Plosser: Believe Fed To Raise Rates 'Well Before' 2013
-- FOMC Aug. 9 Decision Was 'Inappropriate Policy At Inappropriate Time'


Snidley Whipsnae's picture

Plosser trying to appear a dissident again? If he bandies that fable around enough he might become an air casualty... Or, perhaps he is trying to avoid the 'war tribunals' that are in the last chapter of this book...

RunningMan's picture

I'm not smart enough to be able to trade this, so I've resigned myself to simply watching from the restaurant at the end of the universe.


"The major problem—one of the major problems, for there are several—one of the many major problems with governing people is that of whom you get to do it; or rather of who manages to get people to let them do it to them. 
To summarize: it is a well-known fact that those people who must want to rule people are, ipso facto, those least suited to do it. 
To summarize the summary: anyone who is capable of getting themselves made President should on no account be allowed to do the job." 

- Douglas Adams

StychoKiller's picture

Sass that hoopy RunningMan, there's a frood that really knows where his towel is!  :>D

Monedas's picture

Perfect the glans of a penis fits Barney Frank's thirsty rectum ! Monedas 2011 Comedy Jihad Overdrive

alagon's picture

If Crude oil fell to $60 per barrel(it won't ever happen), then we would see an economic boom.

HpDeskjet's picture

$60-oil can happen in 2 weeks as soon as enough people realize that both the FED AND the government are powerless in fighting the forces of nature. The only thing that prevents the total implosion of stocks/commodities/other "risk-on- trades", is the believe of people that sooner or later the FED will print until it runs out of trees.... QE3 is NOT going to happen => there is no need to finance additional stimulus. Any stimulus at this point will have to be financed by not spending money on something else.

OpenEyes's picture

$60 oil won't happen.  If the price begins to drop to $80, supply will be sopped up by an oil-thirsty world outside of the US.  And, don't forget that OPEC will reduce supply to maintain $90+ brent.

WonderDawg's picture

A couple of months ago there were multitudes of people saying we'd never see $80 again, but that didn't take long. When the SHTF, I believe oil will drop below $60, maybe even $40. I could be wrong, but I doubt it.

Smiddywesson's picture

Agreed, there is a virtually unlimited demand for oil and gold, so any significant drops in price will immediately lead to that supply being snapped up.  They can push it down, but they can't keep it down.

Downtoolong's picture

I read a fascinating article yesterday which tried to summarize for mere mental mortals like me the state of the art science of black hole physics. I should point out that not all scientists believe in this stuff, or that even black holes exist. However, among those that do, the parallels between black hole behavior and our world financial system are too apparent to be ignored. For example: one basic concept that has been around for years is the idea of an event horizon. That’s the spatial sphere, around the center of the black hole from which nothing can ever escape once it  passes to the inside of the barrier. It’s the point of no return to the rest of the universe as we know it. The destiny of everything inside the event horizon is set regardless of anything that happens or someone does either inside or outside, and it ain’t pretty. Everything; mass, light, energy, even time itself essentially disintegrates and progresses through a fantastic cataclysmic process before ultimately compressing and converging in an infinitely small point of singularity (how does that sound for a retirement plan).  

I sense our world banking and financial system has crossed an event horizon. It’s convergence to a cataclysmic event may be sealed regardless of what anyone does. But, it’s not all bad news really. Some believe that black holes are portals, which after consuming a large part of one universe essentially spit out a whole new universe on the other side; another big bang type of event perhaps. That suggests we will eventually get another try at everything.

One thing to keep  in mind is that black hole physics is based mostly on equations and theory, whereas the management of our financial system is based on………….see,  there’s  another one of those parallels again.

WellingtonDowd's picture

If you would be so kind, please post a link to said article.  You have piqued my curiousity.

rosiescenario's picture

"That suggests we will eventually get another try at everything."


Ground Hog Day writ large.....thanks for the post.