Wednesday, October 8, 2014

Here Comes The Feds To Save The Day!

(NEW YORK (Reuters)) - U.S. stocks rallied 1 percent on Wednesday, jumping in a volatile session after the Federal Reserve reassured investors that the first interest rate hike would not come before the economy could support itThe Fed has said that it would not raise rates for a "considerable time," and in the minutes from its Sept. 16-17 meeting the U.S. central bank expressed concern that this could be interpreted "as a commitment rather than as data dependent."Data dependency is what the Fed is trying to beat into the skull of Mr. Market, and the labor market is still too squishy for the Fed to be raising rates anytime soon," said Jim O’Donnell, chief investment officer at Forward in San Francisco, which has $5 billion in assets under management. The CBOE Volatility index (.VIX) fell 11 percent to 15.34. 

(CERR Investments).  Here comes the Feds to the rescue once again. The markets decline and the Feds writes new minutes to assure big industry that the ordinary investor is not going to make lots of money off of his bank accounts, money markets, bonds, or CDs for the "considerable time".  A 6 month CD today is worth 0.117%. This is a green light to big industry and banks that the spread will stay the same for a while. The amount of interest banks loan ordinary individuals will remain greater than what we loan to the banks in term of our bank accounts. Now tell me how does this help the ordinary citizen? Are jobs being created due to this policy or is it just temporary jobs where health care can be cut (like Walmart).  It will take a "considerable time" for ordinary investors to forget 2008 and the credit default swaps and loan sharking completed by the big banks. Ordinary investor is looking for a level playing field where inside traders are being caught, regulations are there to help the many instead of the few, and the Federal Government start hiring and creating jobs again. 

(MSN Money). IMF cuts growth outlook, warns on euro zone, Japan.  The International Monetary Fund cut its global economic growth forecasts for the third time this year on Tuesday, warning of weaker growth in core euro zone countries, Japan and big emerging markets like Brazil.  While richer countries like Britain and the United States are seeing a stronger economic expansion, the IMF downgraded its forecasts for the three biggest economies in the euro zone currency bloc - Germany, France and Italy - and said it was essential richer countries maintain monetary accommodation and low interest ratesThe IMF also warned geopolitical tensions between Russia and Ukraine, and in the Middle East, were increasingly posing risks to the global economy and could shock oil prices and cause wider trade and financial disruptions if conflicts escalate.  With loose monetary policy reaching its limits and cash-strapped governments struggling to boost public investment, the IMF urged all countries to pursue structural reforms, such as improving labor market policies, fighting tax evasion and raising infrastructure spending.

(CERR Investments). So it appears the rest of world has come along and figured out that they also need to cut interest rates and keep bank deposit, CDs, and bond returns low and boost the rates or interest for stocks.  Stock prices are inflated right now and you can see it in the absences of Fed policy.  QE3 is coming to an end so the only game in town is to keep interest rates low. What a gamble. There is a problem? We have learn in the early 2000s and 2008 that if the ordinary investor begins to buy stocks big institutions will find a way to get their hands on it either through bogus investment tricks, insider trading, or plain old ponzy schemes. No More TARP!  Be weary my friend and watch for markets to turn in the absence of new fed policy. Then you will see the true market.  Buy the dips!