Biderman On The Fed: "They Control The Market, We Play With Their Money"

The pastel-wearing President of TrimTabs proffers an entirely non-perfunctory prose explaining why he believes we are now due for a stock market decline. Echoing our thoughts, Charles notes that "It's the Federal Reserve that controls the market, it's their money, they're the boss, we play with their money that they print or stop printing". Sadly true (especially for all the highly-paid economists and strategists out there), the pre-2009 drivers of equity performance (specifically new or excess savings) are no longer so; since the initial QE1 this has not been the case and providing us with a thoughtful history of equity market valuations relative to the various QE-efforts over the past few years - especially when compared to income growth and/or macro-economic data - provides just the color required to comprehend this essentially a obvious thread of reality that merely  four years ago would have been denigrated to the tin-foil-hat-wearers of the world. Real-time data says that wages and salaries are barely growing above inflation, Europe is a disaster, and the emerging nations are seeing slowing growth; without the Fed's new money where will cash come from to drive stock prices higher?



And for a little more clarity - here is our overlay of the three stimuli from The Fed so far - showing the similar paths and the April tops in each series... It seems clear now that the self-limiting process of money-creation stalls out in the same periodicity as liquidity spills out into unintended places and 'governs' any real-economy growth expectations via margin compression for corporates (raw materials/energy) or consumer-spending (energy/food)... The similarities in both size and speed of move post Fed stimulus is incredible.

Chart: Bloomberg