The world is aflutter with the latest and greatest from our US Federal Reserve, a privately-owned bank that pretends to regulate itself somehow. When I worked with the editors at Marketwatch to create Revolution Investing, part of the idea was to help people navigate what I called the Brave New Economy we live in. We’ve taken this approach to a whole new level here on TradingWithCody, of course.
There’s been unprecedented amounts and types of economic, monetary and fiscal intervention in the last six years since the 2008 Financial Meltdown, which was caused in part by the same policies and same policy makers who are still running things. Including the latest Fed Chair, Janet Yellen, who today testified to Congress about how she’s planning on keeping the liquidity and wealth redistribution pumps cranking at full speed despite all the known and unknown consequences to such policies.
Analysts, pundits, traders and investors all get lost following the latest headlines and moves from the Fed. The unprecedented nature of the Fed’s actions and policies over the last six years can’t be analyzed by nuance. They have used the blunt tools of 0% interest rates, QE and even accounting principle changes to help the banks survive their own greed and incompetence from decades past. Those blunt tools require blunt analysis. “Taper” isn’t any kind of return to normalcy. And a return to normalized economic and monetary policy would require interest rates somewhere between 5-10% or so, as it has been historically.
But instead you get this from the Fed and the media today:
Yellen Tells Congress That Fed Will Continue to Help Economy
Yellen Says Economy Still Needs Fed Support
Yellen: Labor market healing but economy still needs Fed support
You think the media’s independent in their reporting of this stuff? Think again.
Indeed, if anything, when the Fed says “Sell” you should be buying!
Fed’s Yellen: Social Media, Biotech Valuations ‘Substantially Stretched’
If Yellen says social media and biotech stocks are overvalued, we should be buying social media and biotech stocks with both hands. Remember the “irrational exuberance” speech by Greenspan in Dec 1996? Stocks took a hit for about one day. They were higher a week later, a month later, and much higher a year later.
Here is the rarely seen video of Alan Greenspan first using his now infamous phrase “Irrational Exuberance,” entitled, “Has Irrational Exuberance Inflated Stock and Bond Values? Dow Prices (1996)” ‘”Irrational exuberance” is a phrase used by the then-Federal Reserve Board chairman, Alan Greenspan, in a speech given at the American Enterprise Institute during the Dot-com bubble of the 1990s.’
They can’t see the bubbles that they’re blowing, but they see bubbles that don’t yet exist? I’m asking because I’m confused why we would grant anybody the power to control such large swaths of our economy and society. A large part of my problem with Yellen, her predecessors and the Fed itself is that whole “mainstream economics” which, even with a degree in economics from UNM, I find to be repulsive at best and disingenuous at worst. I have no patience for wealth redistribution and currency manipulation and picking of favorites, etc. Mainstream economics is a tool of socialism and fascism and brainwashing the masses. High priests of economics will be mocked by future generations.
Fed policy has sparked over-valuation in social media and biotech because it has forced retirees in their 70s to invest in risky assets since they can no longer depend on interest to support themselves into their final years. I personally know and have tried to help advise many such people who are putting some of their money into things like social media and biotech stocks when ALL THEY ACTUALLY WANT IS SOME YIELD AND REASONABLE RATE OF RETURN.
We’ve been successfully positioning ourselves to profit from these bubbles and busts that the Fed and the Republican Democrat Regime in power have forced upon us. It’s not fun and it’s not fair that we have to analyze our wealth and prosperity in these terms, but it’s reality. Stick with the Revolution Investing approach and we should be find.