Sunday, July 20, 2014


Excerpt from Doug Noland at CBR in

Importantly, the willingness to adopt an open-ended approach to the third round of QE has been viewed throughout the marketplace as the Fed (in concert with the global central bank community) having adopted a regime of boundless securities market support. This has profoundly affected market perceptions, hence securities pricing, with the greatest impact upon the traditionally higher-risk segments of the corporate and “structured finance” securities markets. 

Stated somewhat differently, the collapse in risk premiums – risk asset price inflation – is this inflationary cycle’s greatest market distortion. Indeed, I would strongly argue that unprecedented liquidity injections coupled with implied (ok, explicit) central bank market backstops has inflated the biggest Bubble yet. Any semblance of a “neutral rate” – or a stable securities market “equilibrium” – would require that central banks extricate themselves from the securities market liquidity and backstopping business. Good luck with that."

The mispricing of risk assets poses a greater threat than a slow down in economy . 5 years AFTER the financial crisis and the FED will not raise the FED funds rate?

This back stopping the stock market has led to a can't lose investor mentality. The VIX, volatility index, on a monthly basis is near record lows, showing little fear of an impending market top or losses.

It's been awhile since I last posted, mostly as the tune hasn't changed, mine and theirs, and my own business has been bombing. Perhaps I should thank the FED, and not criticize.

If a new crisis does arise before the FED has brought back interest rates to a more neutral stance, they will have little in the way of bullets to use to help ease the pain. And just look back and see how much faster prices fall, than rise.

Buyer at these levels beware.