The stock market soars to 14,000
JC29856
Posts: 9,617
great article and illustrations on the visible hand of the fed manipulating the markets. remind me again what QE is supposed to do? who said money doesnt grow on trees?
For the naïve mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared. – Ludwig von Mises
http://advisorperspectives.com/dshort/g ... of-Fed.php
The point to made here is that each time the market has rallied the media, and analysts, try to attribute the rally to a fundamental support. In most cases the arguments boil down to "hope" more than "reality." However, what is really driving the current rally is likely far more simplistic: $85 billion a month.
With the Federal Reserve currently engaged in two simultaneous quantitative easing programs (QE 3 and 4) totaling $85 billion a month in purchases of both mortgage backed and treasury bonds - the excess reserve accounts of the banks have soared in recent weeks. There is a very high historical correlation (85%) between the expansion of the Fed's balance sheet and the stock market.
It is clear that the visible hand of the Federal Reserve is firmly in control of the markets at the moment as liquidity flows are increased. However, extrapolating the current advance indefinitely into the future becomes somewhat dangerous. Each previous program cycle has ended with a fairly nasty decline, in both the markets and the economy, as the fundamental drivers were being supported solely by artificial interventions. Those declines would have likely been far worse had they not been halted by the next round of "liquidity injected goodness."
For the naïve mind there is something miraculous in the issuance of fiat money. A magic word spoken by the government creates out of nothing a thing which can be exchanged against any merchandise a man would like to get. How pale is the art of sorcerers, witches, and conjurors when compared. – Ludwig von Mises
http://advisorperspectives.com/dshort/g ... of-Fed.php
The point to made here is that each time the market has rallied the media, and analysts, try to attribute the rally to a fundamental support. In most cases the arguments boil down to "hope" more than "reality." However, what is really driving the current rally is likely far more simplistic: $85 billion a month.
With the Federal Reserve currently engaged in two simultaneous quantitative easing programs (QE 3 and 4) totaling $85 billion a month in purchases of both mortgage backed and treasury bonds - the excess reserve accounts of the banks have soared in recent weeks. There is a very high historical correlation (85%) between the expansion of the Fed's balance sheet and the stock market.
It is clear that the visible hand of the Federal Reserve is firmly in control of the markets at the moment as liquidity flows are increased. However, extrapolating the current advance indefinitely into the future becomes somewhat dangerous. Each previous program cycle has ended with a fairly nasty decline, in both the markets and the economy, as the fundamental drivers were being supported solely by artificial interventions. Those declines would have likely been far worse had they not been halted by the next round of "liquidity injected goodness."
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