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


By bgamall4   Follow   Sat, 15 Dec 2012, 2:17am PST   525 views   5 comments
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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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Peter P   Sat, 15 Dec 2012, 7:43am PST   Share   Quote   Permalink   Like   Dislike     Comment 1

Because the market fully expected the action?

mell   Sat, 15 Dec 2012, 7:54am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 2

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..

Peter P   Sat, 15 Dec 2012, 8:14am PST   Share   Quote   Permalink   Like   Dislike     Comment 3

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.

bgamall4   Sat, 15 Dec 2012, 9:29am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 4

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.

Peter P   Sat, 15 Dec 2012, 9:34am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 5

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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