Monday, August 8, 2011
8 Aug 2011
Now that I post pretty much only charts I do want to bring this up. Remember when my alter-ego ran this blog in late 2009 and 2010, and I would complain that pumping stock prices and manipulating the economy higher through things like low interest rates, QE, TARP, Cash for Clunkers and the Home Buyers Tax Credit would only raise the cost structure, encourage capital flight and eventually in a lack of bids when people realized the economy, congress, and Bernanke have no pants and stuff would fall extremely fast. It appears that is happening. But the flight to safety isn't to the US dollar which we at least had happen in 2008.
Tomorrow, the Fed minutes are released. I don't really know many options he has because he has painted himself into a corner. Instead of dealing with pain from a lower level, we are now dealing with it at a higher level. Remember that it is easier to "manipulate" Dow at 5K than it is at 10K. The dollar can't rally against the Euro in the face of extreme risk-weakness and tons of bad economic news out of Europe. Fortunately, treasuries have rallied so the government can auction off tons of debt at low interest rates - this paves the way for more monetization. However, gold is calling the bluff of the govt and central bankers. Maybe gold is just rising in anticipation of QE3 and it will be a sell on the news event. Who knows? What options does he have? Negative interest rates?
I'm glad that my clients and I are out of the market and have been since mid July (and mostly out in April) when I rode the last relief rally.
"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets."
at 9:56 PM