“The real issue is that the Fed has expanded its tool kit so dramatically…” –Andrew Huszar
In line with our theme of outlandish and immoral (in my opinion) Fed policy a former Fed official calls QE a backdoor bailout of Wall Street, which anyone with two functioning brain cells knows to be the case. The Andrew Huszar Op/Ed (Wall Street Journal) Confessions of a Quantitative Easer is I suppose old news, but it illustrates what we have been hammering on for so long now; that Fed policy is serving to pump the stock market and pump up the wallets of asset owners.
QE gets about 10 times the notoriety of ZIRP, but I’ll still maintain that it is this evil tool in the Fed’s ‘tool kit’ that is the main and continuing blight on the system as it not only rewards asset owners and speculators, but punishes those least able to speculate due to limited funds.
Please review this chart again and behold the rigged market. Anyone arguing that the bull market in US stocks is normal is being intellectually dishonest. Yet like agent Mulder I want to believe in the healthy bull story*, but I have to believe the data that has drawn the lines on the chart above.
The Dow is on a major leg up because ZIRP is pinning the T Bill yield to the mat… for 5+ years running now. Further, the implication of the chart is that the T Bill had better stay on the mat or the Dow is going to drop so hard it’ll make your head spin. That is what this particular chart says. So yeh, it’s all bullish because policy is pinning it to bullish. Let’s just be honest about that, shall we?
All of this said, the market is the market and the economy the economy. I tell you again that my life is much better with a good economy as my wife works for a really cool technology start-up that requires time to get established. And also I am generally a better bull investor than bear one. But I’ll be damned if I am going to ignore the mechanics at work beneath the surface and behind the scenes.
* There is a theme ongoing about US re-shoring of manufacturing. Yet another media promotion (We don’t make anything in the US anymore, ha ha ha) gone wrong. US manufacturing is not only strong, it is gaining strength and this makes the ZIRP thing even more egregious in my opinion. What the hell are they afraid of? The economy is and has been strengthening since January 2013 by NFTRH’s view.
Here is the interview with Mr. Huszar in case you missed it.