Sunday, June 30, 2013

Fed's Gambit= Truth!...L&C

"Put the Fed in charge of the Sahara Desert, and in five years there will be a shortage of sand."
- Milton Friedman

Here is an idea, suggestion and more all included in what happened to the market in the last month. Like I and many others have been saying, the Fed has no exit strategy. The Fed began to feel the heat as $61.7billion got taken out of bonds. This is the second month in a row of outflows. To attract new money and stem the tide of withdrawals, rates began to rise. This dear reader, means control is no longer in the Fed's hands and their worse fear. Bernanke responds by saying that the "tapering" mentioned in the release of the FOMC meeting notes was in theory and no actual slowing to QE has commenced. Now, consider this: what if I and all who criticize the Fed are correct. Bernanke understands that the Fed's actions were in response to the financial crisis of 2008 and worries about addressing their response will be addressed at that time whenever it happens. This is so typical of bureaucratic agencies. Think Bush and "mission accomplished!"
We Are At That Time
so Bernanke wages a gambit. He says the change is on the horizon and he tests the market. He found out what Warren Buffett once said about the Bernanke's strategy,"anyone can buy bonds, it's the selling that gets tricky." Bernanke has made an "owl" market. "Who" is going to buy low yield bonds? This is why the market had its first down month this year. This is why global bonds lost $61.7b. No one wants a low yield when higher rates are coming.
The truth hurts! That is so true and that is why these bureaucratic agencies like the BEA said back in January that they see GDP at 2.5%. Later, they lowered it to 2.4%. Both of these are close stats and good news for the economy except it is a lie! Final results came out last week. GDP came in at 1.8%. How could anyone be so wrong? Lies!!!! Corruption!!! These people are hired because they have ideas to spin the truth. Do you think that someone like me could ever be hired when all I consider in CPI is food and energy? Those two components are not included. Can you believe me now when I say these people are all corrupt!
With the above being said, do you think that the market would be up double digits like it is? No way, Jose!
Bernanke will try to regain control of interest rates in the sea of bonds, but boats like the Titanic cannot weave like a PT boat. Iceberg's are in the water!
Liars and Crooks: the government can claim that the economy is creating jobs, however they are mostly part-time. In fact there are 2.7million temporary workers at this time. This is the highest ever, but I predict this record will be broken time-after-time. Why? Because Obamacare will kick into gear and companies will not hire full time workers due to the fact that Obamacare forces them into providing medical coverage. They won't do it and as a result, we will all be working part-time.