It was only rallying because of drunken money printing. Everything else fell in place.
Quantitative Easing which really is "Money Printing", "Dollar Crushing", and "Currency Devaluation" all wrapped up in a Tuna Melt is the main reason the stock market is nearing 10K. With the expansion of the monetary base to stratospheric levels, investors are tripping over each other in lifting offers to buy stock.
There have been many market pundits who believe that this will only lead to inflationary pressures further down the road.
www.cnbc.com/id/33004753
www.marketfolly.com/2009/09/julian-robertson-shifts-from-curve.html
Other real smart guys are betting the opposite.
www.marketfolly.com/2009/10/pimcos-bill-gross-bets-on-deflation.html
www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Gross+Sept+On+the+Course+to+a+New+Normal.htm
www.bloomberg.com/apps/news?pid=20601109&sid=aIQSkFg5czbg
Either eventual outcome is disastrous for our economy. This is why we need an effective Federal Reserve to assist the markets in properly unwinding the excess reserves from the system. Give Bernanke some credit, he at least is trying.
Its another reason why I think Ron Paul is a jerk off. His book End The Fed does nothing to alleviate the pain in our economy in the event of another calamity.
www.bloomberg.com/apps/news?pid=newsarchive&sid=anw1RguZxm9E
The markets have become the ultimate casino. Valuations don't matter.
Why should they matter? Why worry about valuations when they are getting effectively free money from the Fed/Treasury?
Why has this happened? Where is the sanity?
The monetary expansion that was intended to cure the credit crisis was in the end accomplished with zero financial market reform, no accounting rule enforcement, and no systemic regulations and rebalancing. Financial engineering is getting more influential and more leveraged bets are taking place. All of that free hot Treasury/Fed dough will never flow to the real economy. It will all go into high beta financial assets which in turn will again force investors to seek alpha. Truly nothing has changed.
Again...Why lend to Americans who are in the process of a secular deleveraging?
Why do this, when the banks can get free money from the government and get much greater speculative returns elsewhere with minimal regulations and reform?
The banks have not deleveraged.
The economy has not deleveraged.
The real economy (Consumers) has started a long term secular deleveraging. The banks know this, so the next real thing to do is to legislate no reform and or regulation with regards to derivatives.
The banks have taken effectively public money, money that should have been used to help the public, but instead credit has contracted and leverage has increased everywhere else. The financial system has just drained the rest of the economy.
When you strip it down to the lowest common denominator, Quantitative easing that is not part of an overall program to reform, regulate and rebalance the system to change and try to correct the pieces that caused the crisis in the first place, is nothing more than a Ponzi Scheme.
The optimal time to reform the system was with the collapse of LTCM in the 90's. They failed and this is where we are.
tradersutra.blogspot.com/2009/03/how-ltcm-enabled-sub-prime-meltdown.html
tradersutra.blogspot.com/2009/08/chrysler-disaster-mans-biggest-weakness.html
Its third world economics at its worst.
My friend, you're an enigma wrapped in a conundrum posing riddles while standing in a quagmire. You rant about how broken the systems is, yet you don't think throwing the bums out and trying to get a workable system in place now is feasible or at the very least, necessary?
ReplyDeleteThe Fed is serving its constituents at the moment and nobody else. You rant about how we can't go back to a gold standard (agreed) but you fail to see that we are in a defacto gold standard. Why on earth would you care about Gold unless you're a jewler, electronics manufacturer, or speculator? Because the price of gold reflects on the strength of your currency (and to a certain extent, your economy) as a whole. In God we may Trust, and hand out Fed Reserve Notes to buy lunch, but the powers that be have one eye on that shiny yellow metal at all times. The system is falling apart yet we're using band-aids when we need tourniquest.
My friend. I am just living in reality. The air is much better down here. The problem is not the Fed per say. We dont elect Fed officials, but we do elect all of the people in Congress. Thats where the problem is. Lobbyists own the country. Who enabled them? The FED? NO! Its Congress and people like Ron Paul. End the Fed talk is just another way for the Blood Suckers in Congress not to take responsibility. Its like saying Tort Reform is whats wrong with Healthcare. Ludicrous! Its much more complex then that. The FED has screwed up royally, I am not defending them, but who is going to effectively do their job? Its not something you can cram for in a 2 hr seminar on the weekend. Anybody can be a nitwit Congressmen, thats why we have some 500 of them. All Ron Paul has to do is look in the mirror and find out who has been betraying American Taxpayers. Its not Ben Bernanke.
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