Best of the Week
Most Popular
1.Ukraine Preface, the Emerging Dynamics Of Petro-Yuan Standard - Jim_Willie_CB
2. Speculations Reversed - Gold Price Stealth Rally 2014 - Peter_Schiff
3.Bubbleberg News Drivel Masquerading as Financial Reporting - David A. Stockman
4.Nationwide UK House Prices 9.5% Inflation, Housing Market on Steroids, Help to Buy Anniversary - Nadeem_Walayat
5.How to Profit from Palladium Huge Price Surge… - Peter Krauth
6.UK Home Solar Panel Installations Good or Bad for House Buying and Selling? - Nadeem_Walayat
7.Global Gold Manipulation Update - MAP Wave Analysis - Marc_Horn
8.Ukraine Capital Controls and 200% Inflation But Still In Better Shape Than US! - Jeff_Berwick
9.The Rise of a Euro-Chino-Russian Superpower - Stephan Bogner
10.Across Europe Secession Movements Intensify - BATR
Last 72 Hrs
Silver, Gold, and What Could Go Wrong - 15th Apr 14
How I Intend to Survive the Meltdown of America - 15th Apr 14
France Wakes Up To The Multicultural Multi-Threat - 15th Apr 14
The Real Purpose Of QE - It’s Not Employment - 15th Apr 14
Peak Coal - 15th Apr 14
Flash Crash, Rigged Markets - What’s the Frequency Zenith? - 15th Apr 14
Forecasting U.S. GDP Growth: A Look at WSJ Economists’ Collective Crystal Ball - 15th Apr 14
Stock Market - Is Something Nasty About to Happen? - 15th Apr 14
How to Trade Your Way To Freedom - 15th Apr 14
Understanding (and Ignoring) the Media Bandwagon Against Gold - 15th Apr 14
When Stock Market Bubble Crashes, Take Refuge in Gold Stocks - 15th Apr 14
Bitcoin Price Strong Appreciation to Be Followed by Declines? - 14th Apr 14
Greece, Turkey, We're Shuffling The Cards on Our Europe Investing Play - 14th Apr 14
Silver Price Ultimate Rally: When Paper Assets Collapse - 14th Apr 14
Get Your Share of an Extra Trillion Euros Money Printing - 14th Apr 14
Fourth Reversals in The Gold and Silver Charts - 14th Apr 14
Stock Market Nearing Rally in a Downtrend - 14th Apr 14
London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - 14th Apr 14
Four Horsemen - Top Economists Explain the Source of Our Economic Crisis - Video - 13th Apr 14
Peak Oil And Global Warming – A Question Of Culture - 13th Apr 14
The Global Banking Game Is Rigged, and the FDIC Is Suing - 13th Apr 14
College Degree Earnings Propaganda - 13th Apr 14 - Andrew Syrios
Stock Market Potential Diagonal Triangle Pattern Forming - 12th Apr 14
Ukraine Crisis – Military Flash Drive Thinking - 12th Apr 14
Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - 12th Apr 14
Gold Preparing to Launch as U.S. Dollar Drops to Key Support - 12th Apr 14
Manipulated Stocks Markets And The Empty Bag - 12th Apr 14
Stock Market - It’s Not Time to Panic… It’s Time to Buy - 12th Apr 14
Doctor Doom on the Fiat Money Empire Coming Financial Crisis - 12th Apr 14
Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - 11th Apr 14
This Bitcoin Price Rally Might Be a Fake One - 11th Apr 14
GDX Gold Stocks Benchmark - 11th Apr 14
Silver Price Finally Outperforms – How Bullish Is That? - 11th Apr 14
Limits to Employment Participation, and Societal Change - 11th Apr 14
US Moves To Restrict Travelers Taking International Flights - 11th Apr 14
Bill Gross to El-Erian: 'Come on, Mohamed, Tell Us Why' You Resigned PIMCO - 11th Apr 14
British Pound GBP/USD - Double Top or Further Rally? - 11th Apr 14
Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - 11th Apr 14
Russia Invaded Crimea and These US Energy Companies Made a Killing - 11th Apr 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Fed Pressuring Investors to Buy Stocks

Stock-Markets / Stock Markets 2013 Feb 11, 2013 - 06:10 PM GMT

By: Robert_M_Williams

Stock-Markets

The average investor is worried and yet he doesn’t know why. The media tells him that things are getting better, and thus far he doesn’t feel like he’s sharing in the improvement. Somehow he’s missed the proverbial boat. Supposedly inflation is low and yet he never makes it to the end of the month with his paycheck. Through manipulation of the markets, the Fed is trying to create an atmosphere that allows for improvement in the economy. Yet it’s this very manipulation that seems to keep investors away from the markets. I know that because I look at the volume of shares traded. Friday’s volume was a measly 3.1 billion shares, an average morning in early 2009.


The Fed has been manipulating the bond market by buying US $85 billion a month and keeping bond prices higher than they would naturally be. The Fed is also manipulating the interest rate by keeping rates very low. This type of relationship has the effect of chasing investors away from bonds even though the Fed is being forced to push more and more supply into the market. Perhaps that’s why the market has taken it upon itself to raise rates over the last six months:


The end result is much like incestuous relationship, full of defects. Finally, by keeping rates low the Fed is pressuring investors by forcing them to buy stocks in the vein hope of capturing dividends and at the same time creating profits through rising stock prices.

So far the Fed has had a lot more success pushing stock prices higher that it has keeping rates lower and bond prices higher. The Fed is straining to keep the wheels on in the bond market and that is evident in the latest numbers. In January the US debt increased by US $47.2 billion and yet the Fed increased its holding in treasuries by more than US $50 billion. That’s only logical if you stop to think about it since the Fed pays you next to nothing for your money while supply and risk increase daily. Besides who knows what the dollar will be worth five, ten or thirty years down the road. After all it’s been losing value for more than a decade and there is nothing to indicate that it will change course anytime soon.

Politically even the janitor that cleans the Capital building knows the US has a serious debt problem, but among Congressmen and Senators there is absolutely no will to deal with the issue. That’s why you will eventually see an elimination of the debt ceiling and that will be celebrated as a solution. Of course nothing could be further from the truth. Meanwhile everyone will look to the stock market for gains and absolutely no one seems to be worried about it. As proof of the complacency, take a look at the VIX:


It recently made a new multi-year low and is still quite low. If the futures are any indicator the Dow should open higher so we just might see the VIX pressured even lower. This is all very confusing since the stocks are paying historically low dividends and the price-earnings ratio is high at 16.50. It seems that value went out the window just after the baby and the bath water.

The panorama gets even more confusing when you stop to consider that the darling of the US market, Apple, has been in a free fall:


Perhaps the market has come to the conclusion that an Apply without Steve Jobs is an Apple out of ideas?

In any event the only real burning question right now is whether or not the Dow can make a new all-time closing high and confirm the Transports in the process:


Back in October 2007 the Dow closed at 14,164 and right now its trading around 13,964, so just 200 points separates the Dow from a new bull market in stocks. Nothing else matters right now and it will have repercussions for inflation, the US dollar, commodities prices and bonds. About the only thing it won’t influence is economic growth and jobs. Talk about irony!

 

Robert M. Williams

St. Andrews Investments, LLC

Nevada, USA

rmw@standrewspublications.com

www.standrewspublications.com

Copyright © 2013 Robert M. Williams - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014