Tuesday, April 6, 2010

Bizaro World

Is it just me or does April 1, 2010 keep happening over and over again? Listening to the Federal Reserve is like experiencing Groundhogs Day every day.

Thus today's ludicrous headline of the day:

http://finance.yahoo.com/news/Fed-keeps-eyes-out-for-apf-3930377589.html?x=0&sec=topStories&pos=main&asset=dc0f6968c8c32a0c87af5ef10bfe8c10&ccode=mp

Can someone please wake me up and tell me that every day is not April Fool's day?

"With rates at record lows, Fed officials are watching out for new speculative bubbles"

Earth to Fed! The entire global capital markets are a massive bubble! You created it! You don't have to search for long, just pick a sector. The entire planet has to shift money to riskier assets because reinvestment rates are ZERO! You the FED created and perpetuated this risky behavior.

Questions and Answers.

When will the markets stop going up? When the Fed takes away the punch bowl.

Who controls the markets? The simple answer is the Primary Dealers! Its BAC, GS, MS, Citi, and other hot shots that are gunning the market. The primary dealers are effectively trading with themselves on both sides of the markets with money borrowed from the Fed at zero rates. No one else is really trading. The machines are doing all of the work.

If and when the Fed decides that a ZIRP is no longer feasible will be the day the market stops going up.

This could be next week or next decade. I personally think that the bond markets have already tightened and is doing the heavy lifting for the reckless Fed. When will the Fed actually do their jobs is anybody's guess? Last month's Discount Rate hike was probably just a little window dressing for a major change in Fed policy in the coming months. The Fed is under the gun and in the cross hairs, they can't sit back and watch another low rate propelled stock market/asset price explosion. This types of markets always unwind and unravel viciously to the downside.

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