The Markets are not Sending Useful Price Signals Folks, This Ain't Normal


By bgamall4   Follow   Sat, 15 Dec 2012, 10:17am   438 views   5 comments
In Las Vegas NV 89117   Watch (1)   Share   Quote   Permalink   Like (1)   Dislike  

http://www.businessinsider.com/qe-4-folks-this-aint-normal-2012-12

Okay, the Fed's recent decision to boost its monetary stimulus (a.k.a. "money printing," "quantitative easing," or simply "QE") by another $45 billion a month to a combined $85 billion per month demonstrates an almost complete departure from what a normal person might consider sensible. To borrow a phrase from Joel Salatin: Folks, this ain't normal.  To this I will add ...and it will end badly. If you had stopped me on the street a few years ago and asked me what I thought would have happened in the stock, bond, foreign currency, and commodity markets on the day the Fed...

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  1. Peter P


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    1   3:43pm Sat 15 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    Because the market fully expected the action?

  2. mell


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    2   3:54pm Sat 15 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    That's right, because people keep posting and pretending we have no budget problems. The US has become so addicted to credit that even the markets don't believe that there will be any meaningful course correction and the fed will keep printing until infinity. Dow to 20K! Until the next crisis..

  3. Peter P


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    3   4:14pm Sat 15 Dec 2012   Share   Quote   Permalink   Like   Dislike  

    The thing is, with so much debt, the only way out may be even more debt, until it hits the breaking point, then it is a game of being the last man standing.

    Nassim Taleb is right saying that debt is a great source of fragility.

  4. bgamall4


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    4   5:29pm Sat 15 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Peter P says

    Because the market fully expected the action?

    At the end of the housing bubble, no one really could determine the real price of a house. There is a mini bubble now, with cash and FHA buyers pushing prices up. No one can tell if those prices are justified, and they probably are not. I believe this mini bubble is unsustainable. Everything is manipulated, stocks, bonds, etc. So no one knows what stuff is worth.

  5. Peter P


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    5   5:34pm Sat 15 Dec 2012   Share   Quote   Permalink   Like (1)   Dislike  

    You are right. We are still in the midst of a boom-bust debt cycle.

    Worth can only be determined instantaneously for certain things (stocks, bonds, homes, etc).

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