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Just the mere suggestion that this round of quantitative easing will eventually end if the economy improves is enough to severely rattle Wall Street. U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away. When that day comes, will the largest bond bubble in the history of the world burst? Will interest rates rise dramatically? Will it throw the U.S. economy into another deep recession? Can the Fed fix this mess without it totally blowing up?
So writes Michael Snyder (http://theeconomiccollapseblog.com) in edited excerpts from his original article* entitled The Financial Markets Freak Out When The Fed Hints That It May Slow Down The Injections. [The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]Snyder goes on to say in further edited excerpts: U.S. financial markets are exhibiting the classic behavior patterns of an addict. Just a hint that the Fed may start slowing down the flow of the “juice” …[and] the financial markets throw an epic temper tantrum. In fact, one CNN article…suggests that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves. Please note that Bernanke did not announce that the money printing would actually slow down any time soon. He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good. For now, the Fed is going to continue wildly printing money and injecting it into the financial markets – so nothing has actually changed yet. Judging by what happened on Wednesday and Thursday, the end of Fed bond buying is not going to go well….If the markets react like this when the Fed doesn’t even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?… [It is] on days like this [that] it is easy to see who has the most influence over the U.S. economy. The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke. The same cannot be said about Barack Obama or anyone else.The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system. If you doubt this, please see this article: “11 Reasons Why The Federal Reserve Should Be Abolished“. Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures. Unfortunately, we can’t send the U.S. financial system off to rehab at a clinic somewhere. The entire world is going to watch as our financial markets go through withdrawal. The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it. Can the Fed fix this mess without it totally blowing up? Unfortunately, most severe addictions never end well. In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently: “One of the enduring analogies of the Federal Reserve’s quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.) You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses, but Ben, the pusher of QE money, knows his addict–the stock market–will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured. You’re dreaming, Ben–your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.” We are rapidly approaching a turning point. We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money and the Fed is desperately hoping that it can find a way to engineer some sort of a soft landing…[and] avoid a repeat of the financial crisis of 2008. Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time. Do you believe him? [Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]*http://theeconomiccollapseblog.com/archives/the-financial-markets-freak-out-when-the-fed-hints-that-it-may-slow-down-the-injections Related Articles: 1. “Eiffel Tower” Patterns Suggest Major Corrections in These 3 Asset Classes  Eiffel tower patterns can be very important to your portfolio construction & management because, when you experience the left side of the tower, you often experience the right side as well which often results in declines of as much as 50% from the peak. Currently it would appear that three specific assets could well be forming such patterns. Read More » 2. A Stock Market Crash Followed This Occurrence In 1929, 2000 & 2007 – It’s Happening Again!  What do 1929, 2000 and 2007 all have in common? Those were all years in which we saw a dramatic spike in margin debt. In all three instances, investors became highly leveraged in order to “take advantage” of a soaring stock market but, of course, we all know what happened each time. The spike in margin debt was rapidly followed by a horrifying stock market crash. Well guess what? It is happening again. Read More » 3. Level of Investor Margin Suggest Its Time to Lower Stock Exposure Some times in history, investors feel so confident about the future of stocks, they actually use up all their available cash and then borrow money to invest in the stock market. Now is one of those times – and it suggests that now is the time to lower one’s stock exposure. Here’s why. Read More »
4. S&P 500′s PEG Ratio Suggests Overvaluation & Coming Correction  The S&P 500 index is trading at record high levels and optimism remains high with Barron’s professional money manager survey indicating a record 74% money managers being bullish on markets even at current levels. [When one] measures valuations with respect to expected growth, [however, the ensuing ratio, the PEG ratio,] suggests overvaluation at these levels. [Let me explain further.] Words: 254; Charts: 1 Read More » 5. It’s Time to Apply the “Greater Fool Theory” and Sell Your Winners to All Those Fools The Dow has surpassed its all-time record high – set in October 2007 – and the S&P 500 is not far behind? Is this the early stage of another great bull market? Let’s look back at the two previous times when the S&P 500 set new all-time highs and see if we can learn something. Wait…first put your “this time it’s different” glasses on. OK, let’s go. Words: 430; Charts: 1 6. Don’t Ignore This Fact: “Greedometer Gauge” Signals S&P 500 Drop to the 500s by July-August, 2013! The S&P500 is likely to achieve a secular (long term) peak this month, then drop to the 500s by July-August 2013. This article explains why. Words: 180 7. This Metric Strongly Suggests a Major Correction in the S&P 500 Could Be Coming History shows that when investors experience a rapid decline in the amount of available cash in their brokerage account to spend/invest quickly such “negative net worth” leads to major corrections in the stock market. Currently such is the case so can we expect another such decline or will it be different this time? 8. Watch Out For Falling Stocks! Here’s Why The stock markets make no sense. They have literally lost touch with reality. Divergences between fundamentals, confidence and the valuation of markets are large [and, as such,] cannot last for long….The only question is how…and how quickly….this correction occurs. Words: 261 9. You Need to Stay in the Stock Market Despite an Impending Economic Collapse – Here’s Why You need to stay in markets despite an impending economic collapse. [Really?! Yes, really.] Normally such an expectation would be addressed by getting out of the way of the oncoming disaster and taking ones chips off the table [but,] in this situation, there is no place to hide. Low-risk assets, like bonds and near-cash, produce little to no return…and the threat of rising interest rates and inflation make them dangerous. Higher risk assets are unavoidable, given current conditions. [Let me explain further.] Words: 830 10. You Can Insure Your Portfolio From Potential Capital Loss – Here’s How Most everything you’ve heard about investing from the mainstream media, your mutual fund advisor and your tax accountant is a lie. You’ve been told…that the entire point of portfolio diversification is to mitigate downside risk yet when the market experiences the inevitable decline, every sector pushes significantly lower – and your “diversified” portfolio suffers as a result, [right? Well, there IS a better way.] Hear me out. Words: 895 11. The U.S. Stock Market Is Overvalued By More Than 50%! Here’s Why Key stock indices are becoming significantly overpriced. The value of the U.S. stock market stands at about 133% of GDP. The average for the past 60 years has been around 82%. By this measure, the U.S. stock market is overvalued by more than 50%! Words: 398 12. Stop! Don’t Forget Market Risk – Remember What Happened in 2000 & 2007/8. Investors are more bullish now than at any time since 2002 but the current rally has not been fueled by improved prospects of actual growth and wealth creation. Instead, it’s mostly due to:
but nowhere do they seem to be considering market risk – the risk that your investment will lose value because it gets dragged down in a falling market. Words: 615 13. Insider Trading Suggests That a Market Crash Is Coming What you are about to read below is startling. •Every time that the market has fallen in recent years, insiders have been able to get out ahead of time… •[What] is so alarming [this time round is] that corporate insiders are selling nine times as many shares as they are buying right now. •In addition, some extraordinarily large bets have just been made that will only pay off if the financial markets in the U.S. crash by the end of April. •So what does all of this mean? [Could it be that they] have insider knowledge that a market crash is coming? Evaluate the evidence below and decide for yourself. Words: 570 14. Ignore Wall Street Cheerleaders: Market Technicals, Fundamentals & Other Info Says Otherwise! [In spite of what] the typical Wall Street cheerleaders, I mean strategists, are predicting, we see the equity market ever more closer to its cyclical top, miners about to retest a major bottom and hard assets with a new catalyst. [This article analyzes 9 pieces of information, complete with charts, that show what is actually going on in the marketplace at this point in time and what the short-term future holds.] Words: 930; Charts: 815. 5 Sound Reasons Investors Would Be Better Off On the Sidelines Than In the Market New year festivities have continued on the stock market even as the Christmas trees have been put away. The “death of the fiscal cliff,” not horrible job numbers and supportive comments from Mario Draghi on the other side of the pond have led to bold and bullish behaviors over the last three weeks. While no one can predict the exact peak, here are five reasons you’re better off on the sidelines than in the market. 16. These Charts Suggest a Possible +/-60% Decline in the S&P 500 by 2014 J.P. Morgan Asset Management has developed a chart showing the past two cycles in the S&P 500 highlighting peak and trough valuations. At face value it is very alarming as it suggests a potential decline of somewhere in the vicinity of 60% over the next year or two and concurs with previous innovative trend analyses included in this article. Charts: 4 17. Current Market Overvaluation (from 33% – 51%!) Suggests Cautious Long-term Outlook Based on the latest S&P 500 monthly data, [my analyses indicate that] the market is overvalued somewhere in the range of 33% to 51%, depending on which of 4 indicators I used. This is an increase over the previous month’s 31% to 48% range. [Let me explain the details.] Words: 475 18. Goldman Sachs’ Leading Indicators Signal Steep Market Crash Ahead Goldman Sachs reports their Global Economic Indicators (GLI) show the world has re-entered a contraction and…is predicting a market crash worse than that of the early 90′s recession and one slightly less than the sell-off at the turn of the millennium. [Below are graphs to support their contentions.] Words: 250 19. Will a Black Swan Event Cause the S&P 500 to Drop by 40%? Mark Spitznagel…warned the other day that the S&P 500 could lose 40% of its value in the next couple of years. So what black swan event could cause the S&P 500 to drop down to 760? [Let’s take a closer look.] Words: 856 20. Is the U.S. Stock Market Topping & About to Plunge? Many signs point to a plunge for the Dow Jones Industrial Average and major indexes rather than a continued climb. If history is ever a good indicator of forthcoming events, it is absolutely imperative that we pay attentions to these signs, and prepare for the worst. Here are a few reasons why the Major U.S stock indexes could see declines in the coming months. Read More » 21. What Are the “Titanic Syndrome” & “Hindenburg Omen”? What Are They Now Saying? There are two market warning signs which have just recently been triggered and which have gotten a lot of press attention due to their catchy names – the Titanic Syndrome and the Hindenburg Omen – both of which are giving a “preliminary sell signal” based on analyses of 52-week New Lows (NL) in relation to New Highs (NH) on the NYSE within a specific period of time. Read More » 22. These 5 Leading Investment Indicators Suggest the Stock Market Is OVERvalued – Take a Look We have been in the throes of a secular bear market, subject to strong cyclical swings in either direction, since 2000. Currently, based on the 5 leading investment indicators analyzed in this article, the measures all confirm that, from a longer-term perspective, the market remains overvalued. Let’s take a look at each to see why that is the case. Read More » 23. History Suggests Dow Has Only 4% More To Go Before Correcting The Dow is just a “pinch away” from a series of resistance lines, ranging from 13 years to 31 years, that have marked important emotional highs & lows in the past suggesting that once the Dow reaches 16,000 or so it will correct. Read More »
24. Latest Stock Valuation Table Says What About U.S. Market Levels? The GNP numbers came out this week for the first quarter of 2013 and there was 1.8% growth yoy to $16.236 trillion…What does this mean to your equity positioning? Read More »
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An Open Message to Ben B. and the rest of the members of Fed:
You have made matters much worse rather than better for the majority of Americans, while creating additional wealth for the Ultra Wealthy like never before in history!
Perhaps it is now time to consider the fiscal plight of the majority of those you serve!
Americans that are still in the Middle Class and all those that are now known as the New Poor are getting SCALPED by the Big Banks which has been enabled the FED! Please consider answering these 3 questions:
==> Why are Big Banks allowed to make record profits by providing excessive loan rates while they themselves are getting their loans from the Fed at almost zero interest?
==> Why has Congressional oversight of the Big Banks and the FED FAILED THE AMERICAN PEOPLE?
==> Why has MSM failed to publicize this nationwide rip off, is it perhaps because so much of our MSM is owned by BIG Corporations which also own/control these Big Banks?
These 6 Corporations Control 90% Of The Media In America – Business Insider
http://www.businessinsider.com/these-6-corporations-control-90-of-the-media-in-america-2012-6
I hope you will consider the above questions and work together with those on the Fed to redefine what your priorities are and begin to turn our economy around by reducing loan rates to average Americans to 1% over what the Big Banks are getting their money for; that will allow Seniors to refinance their home loans and use the extra money they save to do energy upgrades , which in turn will create new jobs and help our country end the fiscal Civil War between the Ultra Wealthy and what is left the once middle class!