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Market Watch Plan Accordingly
Market Watch Plan Accordingly 
Market Watch
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I'm watching. I'm waiting. The time will be here soon... The last time we saw this setup, you'd have made 400% on your money in just 16 months. We've only had one other setup like it, though it wasn't quite as strong... and you'd have doubled your money in 13 months. |
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| Plan Accordingly |
| Wednesday, 17 October 2007 | ||||||||
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What you can't do with a little money, you can do with more money. And the policy makers have certainly done so. By my back-of-the-envelope calculation, they spent about $400 billion this summer to pull the credit market and, consequently, the stock market out of the black holes into which they were sinking. The end result: Oil is at $88 a barrel, and gold just traded above $765 an ounce. So much for acting responsibly. The Cunning Realist, the conservative but nonconforming anonymous blogger, had a lot to say here and here about the issue. I share these views on the Federal Reserve rate cuts in times of heightened inflationary pressures: What was so stunning about the Fed's decision was how, in one brazen moment, it exposed so many years of tough talk as a farce.
The gig really is up, and there's no going back. I've never been a big Ben Bernanke fan. But before two weeks ago, I gave him a solid B for his performance. Because of the rate cut, he gets an F. If the Fed continues to cut, he should lose his ticket to the senior prom.None of this is a surprise to any appropriately skeptical observer of the Federal Reserve. But it's clearer than ever that policymakers think the viability of our financial system depends on the government's ability to stem soft spots at will, both overtly and covertly. I wrote a long post about the geopolitical implications of this a couple of years ago, and it's as relevant as ever. Trading data shows that during the summer market decline, the largest players, essentially bulge-bracket Wall Street trading desks, were massively long. The Fed has now done a wonderful job of bailing them out. And since the foreign exchange markets are a brutal taskmaster--everything comes out in the Forex washing machine, which isn't known for having a gentle "permanent (printing) press" cycle--everyone else will pay for this at the gas pump and corner market. During the past few years, it's been hard to miss a subgenre of economic commentary that's best described as apocalyptic. The same thing happened during the 1970s, and a lot of it is overblown. We have a great financial system, in theory and usually in practice, and things generally work out okay. The key words are usually and generally. Since the mid-'90s and especially since 2003, the Fed has made it clear it will monetize any air pockets in the economy or financial markets. And they monetized big time this summer. There's nothing that you and I can do about this, other than to try to profit from it. This is why natural resources are the place to be as this monetization puts even more pressure on resource prices than it already was, coming from emerging market demand.In doing some research on mutual fund performance this week, I was amazed that the ranking of the best performers is, yet again, similar to what we saw from 2003-06 and now again in 2007. Source : Global ViewPoints This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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