Two
Myths That the Bulls Continue to Cling To Were Just Rendered Moot
July 12, 2012 By gpc1981
http://albertpeia.com/twobullmythsnowmoot.htm
‘Two
myths that the Bulls continue to cling to were rendered moot yesterday. Those
myths are:
1)
That the Fed will engage in more QE.
2)
That
The Federal Reserve has admitted that it targets the stock market.
It’s not surprising given that the stock market is the only real “positive”
outcome that the Fed can claim resulted from its policies. Whether or not we
needed to spend several Trillion Dollars on this is up for debate however, as
the Fed itself admits in its research that ALL of the stock market gains over
the last three years occurred due to market moves around Fed FOMC days.
Put another way, the Fed could potentially
have gotten the same results (S&P 500 at 1,300+) just by staging FOMC
meetings in which it announces that it’s ready to act at any time.
This ties
in with one of my dominant themes: that the Fed is tapped out and will not
engage in aggressive monetary policy unless we have a systemic crisis or a
major bank fails. As far back as May 2011, Bernanke was admitting that the
consequences of QE were no longer outweighing the benefits. It’s not
coincidence that since then the Fed has largely resorted to symbolic
interventions (promises to maintain ZIRP) or verbal interventions “we stand
ready to act at any time.”
Speaking of systemic risk, details are beginning to surface
regarding the Spanish bailout. While everyone views this as a sign that
1) If
2) If
3) Where will the money come from? The EFSF is
essentially tapped out and
The reality is that
Indeed, the far more important question to be asked is: WHY weren’t
the EFSF or ESM made larger during the recent EU leader meeting?
The answer?
Europe, specifically Germany, is tapped out.
First off, the country is only €328 billion away from reaching an
official Debt to GDP of 90%: the level at which national solvency is called
into question.
Moreover, that €328 billion has already been spent via various EU
props. Indeed, when we account for all the backdoor schemes
In Euro terms,
If even a significant portion of that €1 trillion goes bad (which it
will as this money has been spent helping the PIIGS),
This will guarantee Germany losing its AAA status, which in turn
makes its funding costs much higher (see what happened to France in the last
year: that country is now facing bank runs and its own solvency Crisis which
you’ll be hearing about in the coming weeks).
Angela Merkel is up for re-election next year. There is no way on
earth she’ll opt to let
So… is
With that in mind, I’ve begun positioning subscribers of my Private Wealth
Advisory for the next leg down in the markets. We’ve already
locked in over 30 winning trades this year by finding “out of the way”
investments few investors know about and timing our positions to benefit from
the various developments in
