The Fed's Equation for Stock Market Gains

ByBill Bonner agent, economy, jordan, knowledge, linkedin, market, nsa, policy, public Comments Off

We put in a good-citizen call to the SEC the other day.

“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.

“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.

“Oh, don’t worry about that. The NSA is tapping our call anyway.”

“Are you talking about a specific stock?”

“Oh, no… I’m talking about all of them.”

“You mean a Madoff-style scandal?”

“No… no… This is much, much bigger than the Madoff scandal. We’re talking major manipulation. Intentional. Knowledge aforethought. Pumping up all stock prices. Trillions of dollars.”

“Who is doing this?” the agent asked… a certain tone creeping into his voice. He was starting to suspect he had a lunatic on the line.

“The Fed, of course.”

Look at a stock chart… and you will see that the Fed’s QE = U.S. stock market gains.

“Uh… thank you…”

“You gotta go after those bastards.”

“Uh… yes… we’ll look into it.”

“OK, thanks. I just thought you should know.”

Wall Street shook the sleep from its head and rubbed its eyes last week. Investors shrugged off the bad news from Japan and Europe.

As for the bad news from the U.S. itself… it hardly mattered. Yes, the economy was weaker than had been thought — with the worst jobs report in two years. No, there was not much good news coming from corporate earnings, either.

But hey — asset values no longer depend on the performance of the Main Street economy. This is a manipulated market. The Dow rose more than 100 points, reversing a worrying trend.

Since the start of the year, U.S. stocks have been selling off. But last Tuesday, investors found their footings… and recovered their delusions…

Yes! The only thing that matters is that the Fed is on the case. Stocks are being manipulated to the upside. Willfully. Knowingly. Intentionally.

Janet Yellen can talk about tapering quantitative easing (QE). But she can’t do it. The economy needs more support from the Fed. But the Fed doesn’t put more money into ordinary household budgets. You can see that just by looking at jobs, wages, or consumer prices. The U.S. CPI is barely going up at all.

That’s because the Fed’s intervention stays in the financial economy — where the EZ money and credit as a result of ZIRP and QE feeds directly into stock, bond and real estate markets.

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The Fed's Equation for Stock Market Gains

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Author

Bill Bonner