Prediction Comes True

[InTheLight]

Back in May I said this:

The Fed's quantitative easing is helping the stock market, for sure. Investors are getting nearly nothing for returns in interest rates causing them to buy stocks.

But corporate balance sheets are strong. Profit margins are strong. Earnings are strong. I expect we will see the S&P 500 at 1800 by the end of the year and it will keep going for several years. I wouldn't be surprised to see the Dow at 20,000 in the next five years.

http://www.baptistboard.com/showpost.php?p=1985969&postcount=7

Well, today the S&P 500 reached 1,800.

 

[poncho]

U.S. stocks have risen 108% while Barack Obama has been in the White House.

And who owns stocks?

The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Meanwhile, things have continued to get even tougher for ordinary Americans.

While Obama has been in the White House, the percentage of working age Americans with a job has declined from 60.6% to 58.3%, median household income has declined for five years in a row, and poverty has been absolutely exploding.

But the fact that it has been very good for Wall Street while doing essentially nothing for ordinary Americans is not the biggest problem with quantitative easing.

The biggest problem with quantitative easing is that it is destroying worldwide faith in the U.S. dollar and in the U.S. financial system.

In recent years, the Federal Reserve has started to behave like the Weimar Republic. Just check out the chart below...

http://theeconomiccollapseblog.com/...erica-the-real-reason-for-quantitative-easing

Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago. Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt. Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose. The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it. But quantitative easing worked for the Weimar Republic for a little while too. At first, more money caused economic activity to increase and unemployment was low. But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today. This is the path that the Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.

It is really easy to start printing money, but it is incredibly hard to stop. Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit. The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point...

http://theeconomiccollapseblog.com/...or-the-weimar-republic-for-a-little-while-too

Since the end of the last recession, the Dow has been on an unprecedented tear...

Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don't really care.

Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term. Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.

We have now entered a money printing spiral from which there is no easy exit. According to Graham Summers, the Fed has "crossed the Rubicon" and we are now "in the End Game"...

http://theeconomiccollapseblog.com/...or-the-weimar-republic-for-a-little-while-too

 

[InTheLight]

U.S. stocks have risen 108% while Barack Obama has been in the White House.

Not so hard to do considering that when Obama took office the stock market had just lost 45% of its value.

And who owns stocks?

The wealthy do. In fact, 82 percent of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

So what? The vast majority of stock ownership is through mutual funds being held in the middle class's 401k funds and IRA's. Institutional ownership of stocks via mutual funds influences the market far more than rich people making individual trades.

Meanwhile, things have continued to get even tougher for ordinary Americans.

Snip rest of off-topic rant.

 

[poncho]

http://www.baptistboard.com/showpost.php?p=2049527&postcount=21

When you think of a trading floor in London or New York, perhaps you imagine a gaggle of sweaty men elbowing each other out of the way as they use elaborate finger movements to convey their frantic orders.

It's an image popularised by the 1980s comedy Trading Places. But it's also 30 years out of date.

For the fact is that financial trading has undergone a computerised revolution akin to Amazon's takeover of the High Street. All the real action has moved to cyberspace.

http://www.bbc.co.uk/news/business-23095938

The wealthiest people don't make individual trades.

That "45%" was a bubble bursting. That's what all bubbles do eventually. I predict this bubble will burst too.

 

[Revmitchell]

It matters not what it is doing now. If you were to stop the QE the stcok market would crash. What is going on right now is a bubble. It is all fake and nothing real and true to stand on. It is a mistake.

 

[Don]

I believe both ITL and Rev are correct. It's a bubble that the current Fed executives have no plans of stopping.

To be honest, I quite expected a stock market fluctuation last week with the announcement that Obama was going to require the insurance industry to re-instate all those cancelled policies, which I was sure was going to cause some unease about the market; but at the same time, Yellin was making the announcement that QE would continue, which not only kept the market at its level, but "relieved" the brokers and Wall Street folks, allowing ITL's prediction to come true.

And with no plan from the Fed about reducing or stopping QE, then the market will remain in an upward trend until further notice. That means that if we ever do stop QE, there's the possibility of a very loud and discernible "pop". The only way to avoid or at least reduce the effect of that is to "ease the easing."

 

[Don]

By the way: Did anyone catch CNN yesterday afternoon? I don't know if it was Zakaria or whoever, but they were talking about Venezuela, and they noted the 5 ways to ruin your country's economy as quickly as possible....

 

[InTheLight]

It matters not what it is doing now. If you were to stop the QE the stcok market would crash. What is going on right now is a bubble. It is all fake and nothing real and true to stand on. It is a mistake.

That's simply not true. EVERYBODY knows that QE will be tapered off and stopped. It's mostly already figured into the market. The first article cited by Poncho says that the bank of England figures their loose money policy is responsible for about 25% of their market gains. Here in the U.S. that number has been pegged at around 20%-25%. Yes, there will be a correction with each announcement of tapering but the market will not "crash".

Also, as I said back in May there are strong earnings, strong balance sheets, good profit margins. This is the main driver of the stock market, not QE3.

 

[Revmitchell]

Baloney, a few weeks ago when the fed suggested he "might" ease it off it started dropping like a rock. You can't prop the market up on thin air like this and think there will be no consequences.

 

[InTheLight]

To be honest, I quite expected a stock market fluctuation last week with the announcement that Obama was going to require the insurance industry to re-instate all those cancelled policies, which I was sure was going to cause some unease about the market; but at the same time, Yellin was making the announcement that QE would continue, which not only kept the market at its level, but "relieved" the brokers and Wall Street folks, allowing ITL's prediction to come true.

I was thinking there would be a correction as well, because of the uncertainty the announcement would cause, but then thought there is no way that King Obama can unilaterally declare this new policy, and I figured the stock market was thinking the same thing.

And with no plan from the Fed about reducing or stopping QE, then the market will remain in an upward trend until further notice. That means that if we ever do stop QE, there's the possibility of a very loud and discernible "pop". The only way to avoid or at least reduce the effect of that is to "ease the easing."

And that is the announced plan--slowly ease away from the bond buying program, perhaps by dropping from $85B a month to $70B, then a couple of months later to $50B, and so forth. Each announcement will cause a correction, maybe 1%-2%, then corporate earnings reports will come out and the market will respond upwards again. When the dust settles we may end up with a "lost year", or a year where the market is essentially flat. That is a whole lot better than a crash.

 

[InTheLight]

Baloney, a few weeks ago when the fed suggested he "might" ease it off it started dropping like a rock. You can't prop the market up on thin air like this and think there will be no consequences.

That wasn't a couple of weeks ago, it was June 21st. I know because I bought some stock that Friday. The market recovered by July 10th. And I'm telling you it's not "thin air". There are record earnings over the past couple of years. The QE is thought to contribute 20% to the run-up in stock prices. Gradually withdrawing it will not cause a crash.

 

[poncho]

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss drinking the kool aid (never mind the cyanide) while the young and unemployed of Ireland are encouraged to emigrate by government economists determined to flatter their Troika stats. In the second half, Max interviews author and investor, Peter Schiff, about inflation in fraud as governments want a cut of financial crimes and the trickle down monetary policy ponzi scheme.

http://www.youtube.com/watch?v=MNXmL771mBA#t=334

 

[Revmitchell]

That wasn't a couple of weeks ago, it was June 21st. I know because I bought some stock that Friday. The market recovered by July 10th. And I'm telling you it's not "thin air". There are record earnings over the past couple of years. The QE is thought to contribute 20% to the run-up in stock prices. Gradually withdrawing it will not cause a crash.

The Only reason stock prices are up is because of QE. Remove QE and there is nothing to support it right now. That is thin air.

 

[poncho]

Which America Do You Live In?

If we truly did have a free market capitalist system, the entire country would be a land of opportunity and things would be getting better for everybody. Unfortunately, that is not the case at all. The following are 21 facts about "wealthy America" and "poor America" that are hard to believe...

#1 The lowest earning 23,303,064 Americans combined make 36 percent less than the highest earning 2,915 Americans do.
#2 40 percent of all American workers (39.6 percent to be precise) make less than $20,000 a year.
#3 According to the Pew Research Center, the top 7 percent of all U.S. households own 63 percent of all the wealth in the country.
#4 On average, households in the top 7 percent have 24 times as much wealth as households in the bottom 93 percent.
#5 According to numbers that were just released this week, 49.7 million Americans are living in poverty. That is a brand new all-time record high.
#6 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.
#7 Household incomes have actually been declining for five years in a row and total consumer credit has risen by a whopping 22 percent over the past three years.
#8 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.
#9 The homeownership rate in the United States is at an 18 year low.
#10 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.


CONTINUE . . .

The problems that plagued our financial system back in 2008 have never been fixed. They have just been papered over temporarily by trillions of easy dollars from the Federal Reserve. All of this easy money is keeping stocks artificially high and interest rates artificially low.

Right now, the Federal Reserve is buying approximately 85 billion dollars worth of U.S. government debt and mortgage-backed securities each month. We are told that the portion going to buy U.S. government debt each month is approximately 45 billion dollars, but who knows what the Fed is actually doing behind the scenes. In any event, by creating money out of thin air and using it to remove U.S. Treasury securities out of circulation, the Federal Reserve is essentially monetizing U.S. government debt at a staggering rate.

But Federal Reserve officials continue to repeatedly deny that what they are doing is monetizing debt. For instance, Federal Reserve Bank of Atlanta President Dennis Lockhart strongly denied this back in April: "I object to the view that the Fed is monetizing the debt".

How in the world can Fed officials possibly deny that they are monetizing the debt?

Well, because the Fed is promising that it is going to eventually sell back all of the securities that it is currently buying.

Since the Fed does not plan to keep all of this government debt on its balance sheet indefinitely, that means that they are not actually monetizing it according to their twisted logic.

Try not to laugh.

http://theeconomiccollapseblog.com/...ng-a-staggering-amount-of-u-s-government-debt

 

[InTheLight]

The Only reason stock prices are up is because of QE. Remove QE and there is nothing to support it right now. That is thin air.

Well if you say so, it must be true.

 

[InTheLight]

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss drinking the kool aid (never mind the cyanide) while the young and unemployed of Ireland are encouraged to emigrate by government economists determined to flatter their Troika stats. In the second half, Max interviews author and investor, Peter Schiff, about inflation in fraud as governments want a cut of financial crimes and the trickle down monetary policy ponzi scheme.

http://www.youtube.com/watch?v=MNXmL771mBA#t=334

Off topic. Divert, distract, distort.

 

[InTheLight]

If we truly did have a free market capitalist system, the entire country would be a land of opportunity and things would be getting better for everybody.

<snip>

Off topic. Divert, distract, distort.

 

[poncho]

<snip>

Off topic. Divert, distract, distort.

Remember, just the suggestion that the Fed would begin to slow down the pace of this buying spree a little bit was enough to send the financial markets into panic mode a few months ago.

If the Fed does decide to permanently stop quantitative easing at some point, stocks will drop dramatically and interest rates will skyrocket because there will be a lot less demand for U.S. Treasuries. In fact, interest rates have already risen substantially over the past few months even though quantitative easing is still running.

Overall, the Federal Reserve now holds 32.47 percent of all 10 year equivalents, and that percentage is rising by about 0.3 percent each week.

If the Federal Reserve does not keep doing this, the financial markets are going to crash because they are being propped up artificially by all of this funny money.

But if the Federal Reserve keeps doing this, it is going to become increasingly obvious to the rest of the world that the Fed is simply monetizing debt and is starting to behave like the Weimar Republic.

The remainder of the planet is watching what the Federal Reserve is doing very carefully, and they are starting to ask themselves some very hard questions.

http://theeconomiccollapseblog.com/...ng-a-staggering-amount-of-u-s-government-debt

Okay Crabby, you and Plucky the chicken can have the floor back now. :smilewinkgrin:

 

[InTheLight]

Remember, just the suggestion that the Fed would begin to slow down the pace of this buying spree a little bit was enough to send the financial markets into panic mode a few months ago.

Which they recovered from in less than 3 weeks.

If the Fed does decide to permanently stop quantitative easing at some point, stocks will drop dramatically and interest rates will skyrocket because there will be a lot less demand for U.S. Treasuries.

Why would there be less demand for a product that pays more interest? Interest rates will go up but they will not "skyrocket".

In fact, interest rates have already risen substantially over the past few months even though quantitative easing is still running.

Substantially? Since the "panic" (as you called it) 30 year Treasuries have gone from 3.30% to 3.76%. 10 year notes have gone from 2.51% to 2.68%. If that is what you call "substantial" I suppose a 1% gain would be "skyrocketing"?

Overall, the Federal Reserve now holds 32.47 percent of all 10 year equivalents, and that percentage is rising by about 0.3 percent each week.

And, so? Please make up your mind--you say it is dangerous for China to own our debt, now you insinuate it is wrong for the Fed to own our debt.

If the Federal Reserve does not keep doing this, the financial markets are going to crash because they are being propped up artificially by all of this funny money.

I guess as long as you say it, it must be true.

The remainder of the planet is watching what the Federal Reserve is doing very carefully, and they are starting to ask themselves some very hard questions.

Central banks in England, France, Germany are pursuing a similar strategy to QE. Except they have started to ease off and are experiencing the ups and downs that look like they will have a "lost year" that I mentioned in a previous post in this thread. Point is, their markets are not crashing.

 

[poncho]

Which they recovered from in less than 3 weeks.

Plucky the chicken spoke and the market reacted negatively so Plucky the chicken come back and said "only kidding folks" we're not going to taper.

The market reacted positively. So what was your point?

Why would there be less demand for a product that pays more interest? Interest rates will go up but they will not "skyrocket".

Because demand is being artificially created by the Fed. If the Fed stops artificially creating demand, demand drops. Yo.

Substantially? Since the "panic" (as you called it) 30 year Treasuries have gone from 3.30% to 3.76%. 10 year notes have gone from 2.51% to 2.68%. If that is what you call "substantial" I suppose a 1% gain would be "skyrocketing"?

Right now, the yield on 10 year U.S. Treasuries is about 30 percent above its 50 day moving average. That is the most that it has been above its 50 day moving average in 50 years.

Like I mentioned above, we are moving into uncharted territory and this data doesn't really fit into the models used by derivatives traders. The yield on 5 year U.S. Treasuries has been moving even more dramatically...[1]

And, so? Please make up your mind--you say it is dangerous for China to own our debt, now you insinuate it is wrong for the Fed to own our debt.

My mind is made up. It's wrong to have a debt based fiat monetary system designed to put us in debt and keep us in debt indefinitely.

There's only two reasons to have a monetary system like that. 1. To make us debt slaves to a group of private international bankers. Why does a supposedly sovereign nation need to borrow money from a group of private bankers that creates it out of thin air then loans it to the government at interest when the government could print it's own interest free money? 2. Politicians like hiding tax increases by inflation rather than directly raising taxes.

I guess as long as you say it, it must be true.

Hey if you believe Plucky the chicken is being honest with you keep listening to him.

Central banks in England, France, Germany are pursuing a similar strategy to QE. Except they have started to ease off and are experiencing the ups and downs that look like they will have a "lost year" that I mentioned in a previous post in this thread. Point is, their markets are not crashing.

Tell that to Irish youth that are receiving "eviction notices" from their government economists.