Market is not rallying
As you remember, dear reader, we decided to hoist our old, tattered “Crash Alert” flag up last week. About mid-week, as we recall. Not that we had any inside information. Mr. Market doesn’t talk to us directly. We just read the papers, just like everyone else.
What we noticed last week was that the Fed had given stocks, bonds commodities, and gold the biggest push in recorded history with $600 billion coming into the market. It was long. It was going to stay long, and if it didn’t do the job there was plenty more where that came from. Plenty more. Because this money came from nowhere, and if you can get money out of nowhere you can get a lot of it.
In effect, Ben Bernanke gave the market the Mother of All Puts. Stocks go down? Put them to the Fed. They’ll buy anything.
Yes, Mr. Bernanke is trying to give “risk on” investors a put, protecting them from the downside by adding more and more money. No, investors are not sure this plan is really going to do them any good. The stock market went up only very briefly on the day following Mr. Bernanke’s announcement. Then, there was no follow-through.
Special Offer: Make the most out of gold’s phenomenal move higher but don’t get left holding the bag when it’s time to run.? Click here for instant access to market timing analysis and specific gold, silver and hard asset model portfolios in Curtis Hesler’s Professional Timing Service.
All very well to get hot and bothered speculating on the fall of the dollar (and the rise of everything else). But there is something so desperate and foolhardy in Mr. Bernanke’s money-printing, it just doesn’t feel right. It feels more like something a banana republic would do. The central bank is encouraging speculation. Oh, by the way, who speculates? Is it the poor? The middle classes? The working stiffs?
No? It’s the speculators, right? The rich, in other words, are the guys who can get money at ultra-low interest rates from the Fed (directly or indirectly) and use it to speculate on say, cotton (up almost 100% this year) or Chinese stocks.
The Fed has just given the elite a huge wad of cash and a promise that it will put up more cash, if necessary and yet, stocks did not go up much. Something is wrong. That’s why we raised the “crash alert” flag. It is as if this market wanted to go down, no matter what the Fed was doing. Or maybe it didn’t trust the Fed. Or maybe investors figured that acting like a banana republic was not really good for stock prices.
We don’t like the looks of it and we’re get out of all risky investments.
How the Market Really Feels About Bernanke’s Money Printing by Bill Bonner originally appeared in the Daily Reckoning.
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.
No comments:
Post a Comment