Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
Stock Market Trend & Trade Signal Of the Decade - 27th Aug 15
Keep Your Eye On the Gold and Silver Bear - 27th Aug 15
Refugees Expose Europe’s Lack Of Decency - 27th Aug 15
How to Profit from China's Currency War - 27th Aug 15
How China's Currency Policies Will Change the World - 27th Aug 15
Chinese Medicine not Impressing Dr Copper - 27th Aug 15
Novel Biotech Novel Technology Platforms with Dramatic Growth Potential - 27th Aug 15
China Stocks Bear Market Crash, Are We Near the Bottom Yet? - 27th Aug 15
Stock Market Crash Black Wednesday Rally Crushes the Bears - 26th Aug 15
VIX Shorts Being Squeezed While SPX Prepares for Another Decline - 26th Aug 15
Why China's Economy is Deteriorating - 26th Aug 15
Citizenship as a Weapon: Travel Controls and What You Can Do About It - 26th Aug 15
Gold and Silver - How To Manipulate a Market - 26th Aug 15
How to Make a Quick 20% When the Stock Market Crashes - 26th Aug 15
Why We Can’t Handle A Stocks Bear Market - State Budgets Will Implode - 26th Aug 15
Stocks Bear Market, Is This 1929 All Over Again? - 26th Aug 15
The One Trading Strategy You Needed for Stock Market Crash - 26th Aug 15
Second Chance To Buy Cheap Gold Mining Stocks - 25th Aug 15
Gold Facts and Gold Speculations - 25th Aug 15
The Stock Market Crash Season is Here… - 25th Aug 15
Liftoff Setback Leads to U.S. Dollar Pullback - 25th Aug 15
The Stock Markets Are Extraordinarily Volatile, Here's What to Do - 25th Aug 15
Israel: The Case Against Attacking Iran - 25th Aug 15
Saudis Could Face An Open Revolt At Next OPEC Oil Meeting - 25th Aug 15
How to Calmly Weather This Stock Market Downturn - 25th Aug 15
Stock Market Sound the Alarm - 25th Aug 15
Stock Market Meltdown - Dow Monday 1000 Point Crash then Rebound, What's Next? - 25th Aug 15
El-Erian: Stock Market Sell off Is Not 1998 or 2008 - 25th Aug 15
Gold the Ultimate Financial Crisis Insurance - 25th Aug 15
Stock Market Black Monday Crash Fizzles Out, Next Black Tuesday? - 25th Aug 15
Black Monday - Rolling A Wheelbarrow Of Dynamite Into A Crowd Of Fire Jugglers - 24th Aug 15
Playing the Chinese Trump Card - 24th Aug 15
Gold and Silver: Heading for a “Blue Screen of Death” Event? - 24th Aug 15
Japan Economy Clear Conclusions Concerning QE - 24th Aug 15
Stock Market Blockbuster Right From the Open... - 24th Aug 15
Silver And The Petrodollar - 24th Aug 15
Why the Stock Market Sell-Off Happened – and How to Make Money on It - 24th Aug 15
Stocks Correct, Panic Ensues. The End Of The World? - 24th Aug 15
Stock Market - The Sky IS Falling - 24th Aug 15
SP500, DAX, FTSE - When Stock Markets Talk, Pay Attention - 24th Aug 15
Stock Market Black Monday - Full Crash Alert! - 24th Aug 15
Stock Markets Implode as China Literally Explodes - 23rd Aug 15
Stock Market Bloodbath - The Feds Gonna Need A Bigger Balance Sheet - 23rd Aug 15
Stock Market Due For A Breather (But More To Go) - 23rd Aug 15
Stock Market 20% Bear Market in the Works - 23rd Aug 15
Ankara: the New Capital of Jihad, U.S. Policy for Strengthening ISIS - 23rd Aug 15
Will Rising Interest Rates Crash UK House Prices? - Video - 23rd Aug 15
Stock Market Primary IV Underway? - 22nd Aug 15
Gold And Silver – NWO In Its Element: Problem, Reaction, Solution. Beware - 22nd Aug 15
Stock Market Nirvana Has Been Broken - 22nd Aug 15
Three Ways to Profit from the Stock Market Correction - 22nd Aug 15
S&P 2040 Breaks Down... Stock Market Turns Bearish - 22nd Aug 15
Storm Clouds Are Gathering Around Peer-to-Peer Lending Sector - 22nd Aug 15
Crude Oil Price Crash Continues: West Texas Crude Below $40, Brent Near $45 - 22nd Aug 15
Pandemonium in the Stock Market, Dow falls 1,000 points in a week - 22nd Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

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.


© 2005-2015 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

Biggest Debt Bomb in History