Marc Faber: "The Best Thing The Fed Could Do For Markets Would Be To Collectively Resign"
In
a Bloomberg TV interview following today's quixotic "QE3/non-QE3
announcement, which is Operation Twist 2, but not LSAP, and ushers in
economic recession, even as it sends risk assets soaring, and somehow
pushes the 2 Year a whopping 20 bps tighter so buy,buy, buy" and is
really very much ado about nothing, the always outspoken Marc Faber had
some very choice words about life, the universe and especially the
residents of the Marriner Eccles building. While there still appears to
be some confusions as to whether today's Fed decision to peg rates at
zero for 2 years is QE3 or not, Faber believes that the decision to not
enact more Large Scale Asset Purchases is "the right thing" although
when it comes to the market, it "is more likely to move still lower. We
are very oversold. We can have a rebound like we did today, maybe we'll
have a rebound next week or so, but in general I think we will test
the July lows of last year, the S&P at 1,010. After that, probably
we'll get probably a QE3 announcement." Naturally, Faber does not
think gold is in a bubble, and as to what one can do with gold, his
response is that "you give your girlfriend copper rings and I give them gold rings and I keep them longer."
Indeed, no bubble there. Last but not least is his suggestion what the
Fed should do: "The best [the Fed] could do for markets would be to
collectively resign." Precisely, which is why it will never happen.Harvey Organ, Tuesday, August 9, 2011
Fed Keeps Interest Rates at zero for another two years/no QEIII/ the Dow juiced by the the Plunge Protection Team
August 9, 2011, at 5:16 pm
by Dan Norcini in the category Trader Dan Norcini |
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by Dan Norcini in the category Trader Dan Norcini |
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For more from Trader Dan visit his blog at www.TraderDan.net
Dear CIGAs,
The FOMC announcement this afternoon sent the equity markets into a complete turnabout from yesterday’s big selloff. The catalyst? Try the fact that the Fed said that the economy is so weak that interest rates will not be raised until at least the middle of 2013 – a full two years away! That acknowledgement, namely, that growth is so sluggish, the economy so moribond and unemployment so chronically high, sent money flowing into BOTH stocks and bonds at the same time.
How’s that for a neat trick by the boyz at the Fed?
Here is the deal – the FOMC is attempting to drive money out of bonds and INTO equities based on the fact that they have guaranteed practically no return as far as yields go on short term Treasuries for at least two years. Think about that. As an investor would you want to lock up money for that long for that kind of yield or would you want to buy stocks and attempt to capture a bit better return on your investment capital. After all, something beats nothing as far as returns go, especially if you think that this easy money policy is going to feed into further asset appreciation as the Dollar further succumbs to the news. Forget about the ECB’s quasi QE program to buy up Italian and Spanish debt. The Euro was bought like mad while the Dollar was pounded lower as the Fed is obviously sacrificing the Dollar in an attempt to keep a low interest rate environment in which stocks are rising. That is at least, what they hope to create. I suspect that they are going after higher equity prices in an attempt to gin up confidence in the US economy by creating a rising stock market. What more can I say than YIELD. Here we go again – chase and chase yield.
On the technical chart, after plowing through the 38.2% Fibonacci retracement level last evening in Asian trading, the S&P shot right back through it to the upside, at the exact moment in time that it needed to I might add. The next target for the bulls will be to take this index back through the 1200 level. Should they be able to do that, then they have a legitimate shot at taking price back towards the former broken support level at the 1250 level.
I would watch the US Dollar very closely right now as a result of today’s FOMC statement. I am coming away with the idea that they are now resorting to currency debasement but in a manner in which it is not so obvious as if they had just come out and said, "We are going to do a QE3". They have effectively told everyone that there is not going to be any growth worth speaking of for the foreseeable future in the US economy and that therefore yield on US Treasuries will be very low. They are also now counting on the market to take this idea of slow growth and bid up the back end of the yield curve without fear of the inflation monster. This is going to be an interesting exercise to observe.
Can the Fed manage to induce investors/traders to plow into stocks without having them also plow money into the commodity sector. If Bernanke and company had come right out and announced another attempt at QE3, commodity prices, particularly energy prices would have shot up immediately producing that same dampening impact on the consumer and the overall economy that it did during QE1 and QE2. By taking this line of approach, the Fed is hoping to convince market players that growth in the economy will be so slow that there will be no increasing consumer or business demand for energy and thus no reason to bid up the price of crude oil and thus gasoline. Same goes for food prices. We will simply have to wait and see how this plays out but for today at least, they managed to take equity prices up while taking commodity prices down. After the linkage we have been seeing between the two for both QE’s, this is no mean feat.
Dear CIGAs,
The FOMC announcement this afternoon sent the equity markets into a complete turnabout from yesterday’s big selloff. The catalyst? Try the fact that the Fed said that the economy is so weak that interest rates will not be raised until at least the middle of 2013 – a full two years away! That acknowledgement, namely, that growth is so sluggish, the economy so moribond and unemployment so chronically high, sent money flowing into BOTH stocks and bonds at the same time.
How’s that for a neat trick by the boyz at the Fed?
Here is the deal – the FOMC is attempting to drive money out of bonds and INTO equities based on the fact that they have guaranteed practically no return as far as yields go on short term Treasuries for at least two years. Think about that. As an investor would you want to lock up money for that long for that kind of yield or would you want to buy stocks and attempt to capture a bit better return on your investment capital. After all, something beats nothing as far as returns go, especially if you think that this easy money policy is going to feed into further asset appreciation as the Dollar further succumbs to the news. Forget about the ECB’s quasi QE program to buy up Italian and Spanish debt. The Euro was bought like mad while the Dollar was pounded lower as the Fed is obviously sacrificing the Dollar in an attempt to keep a low interest rate environment in which stocks are rising. That is at least, what they hope to create. I suspect that they are going after higher equity prices in an attempt to gin up confidence in the US economy by creating a rising stock market. What more can I say than YIELD. Here we go again – chase and chase yield.
On the technical chart, after plowing through the 38.2% Fibonacci retracement level last evening in Asian trading, the S&P shot right back through it to the upside, at the exact moment in time that it needed to I might add. The next target for the bulls will be to take this index back through the 1200 level. Should they be able to do that, then they have a legitimate shot at taking price back towards the former broken support level at the 1250 level.
I would watch the US Dollar very closely right now as a result of today’s FOMC statement. I am coming away with the idea that they are now resorting to currency debasement but in a manner in which it is not so obvious as if they had just come out and said, "We are going to do a QE3". They have effectively told everyone that there is not going to be any growth worth speaking of for the foreseeable future in the US economy and that therefore yield on US Treasuries will be very low. They are also now counting on the market to take this idea of slow growth and bid up the back end of the yield curve without fear of the inflation monster. This is going to be an interesting exercise to observe.
Can the Fed manage to induce investors/traders to plow into stocks without having them also plow money into the commodity sector. If Bernanke and company had come right out and announced another attempt at QE3, commodity prices, particularly energy prices would have shot up immediately producing that same dampening impact on the consumer and the overall economy that it did during QE1 and QE2. By taking this line of approach, the Fed is hoping to convince market players that growth in the economy will be so slow that there will be no increasing consumer or business demand for energy and thus no reason to bid up the price of crude oil and thus gasoline. Same goes for food prices. We will simply have to wait and see how this plays out but for today at least, they managed to take equity prices up while taking commodity prices down. After the linkage we have been seeing between the two for both QE’s, this is no mean feat.
The Price Of A Big Mac Is Now $17.19 In Zurich
It's all about supply and demand. Increased demand for the Swiss franc coupled with expanded supply of dollars and euros has caused the franc to surge over the last weeks and months. It wasn't too long ago that it would take 1.20 francs to buy a US dollar. Now it takes $1.40 to buy a single franc. I can think of a lot of words to describe the performance of the US dollar. Farce. Joke. Lunacy. Embarrassment. Disgusting. But it's more clearly summed up like this: the price of a Big Mac is in Zurich is now so high (at $17.19) that a minimum wage employee in Minneapolis, Minnesota, would have to work for nearly 4-hours in order to afford it. This is what stability looks like to Ben Bernanke.A Vote of 'No Confidence'
08/09/2011 - 00:57
08/09/2011 - 17:37
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