Regarding the Federal Reserve, Wednesday’s Wall Street Journal stated: “Their monetary strategy isn’t found in standard textbooks. The Central bankers are in effect conducting a high stakes experiment…(that) could kindle inflation or sow the seeds of another financial crisis.” Kenneth Rogoff, professor of economics at Harvard and author of “This Time is Different” has examined 800-years of data. He said, “They are taking risks…it is an experimental strategy.”
As pointed out by MIT
Professor Athanasios Orphanides, this strategy failed in the 1970’s when the
central banks kept rates too low for too long – it brought high inflation, not
high employment. – Wall Street Journal, print edition, 12/12/12
MOHAMED EL-ERIAN, PIMCO
CEO & CO-CHIEF INVESTMENT OFFICER (NBR) 12 Dec 2012
Regarding the Federal
Reserve’s latest moves (additional Bond buying), El-Erian said in a Nightly
Business Report interview: “The analogy,
Susie, is look at the patient who is taking an experimental drug, that hasn’t
been clinically tested…It doesn’t speak to what is going to happen to equity
prices on its own, but it does speak to certain things. It speaks to a weaker
dollar, probably higher gold prices and more inter-day volatility.”
“The most likely scenario
is that you get a bit of tranquility and then something breaks. And it breaks
in the sense that systems are not built to be run at artificial interest rates
and with the Fed being both a player and a referee in markets.”
“… we are taking down
risks. It has been a wonderful time for risk assets. It is time to reduce your
risk exposure and it is time to build a little bit more inflation protection in
your portfolios.” Interview at….
http://www.nbr.com/videos/video/2031787879001#.UMnxU794w7I
AND THIS FROM A MEMBER OF
THE FEDERAL RESERVE
from CNBC: The U.S. Federal Reserve's latest policy
actions risk stoking inflation and stray into fiscal policy territory, said Richmond
Federal Reserve President, Jeffrey Lacker, explaining why he had voted against
the Fed's policy actions on Wednesday…"With economic activity growing at a
modest pace and inflation fluctuating close to 2 percent the Committee's
inflation goal - further monetary stimulus runs the risk of raising inflation
and destabilizing inflation expectations."
Furthermore, he argued
buying mortgage-backed bonds meant the Fed was favoring housing over other
parts of the economy. "Deliberately
tilting the flow of credit to one particular economic sector is an
inappropriate role for the Federal Reserve," he said, adding that trying
to influence credit allocation within the economy was a function of fiscal
policy. Story at…
http://www.cnbc.com/id/100314725
ANOTHER RECESSION CALL
“How to position yourself for the coming recession” (MarketWatch) - John
Nyaradi, Publisher of Wall Street
Sector Selector
“With the forecast for recession at 100%, it's highly likely that investors
will need to be more active and knowledgeable than ever… Wall Street Sector
Selector remains in "red
flag" mode as we approach the end of 2012.”
Full story at….
http://www.marketwatch.com/story/us-chance-of-recession-is-100-2012-12-12?link=MW_popular
MARKET RECAP
Friday
the S&P 500 was down 0.4% to 1414 (rounded). VIX was up 2.7% to 17.00.
Apple broke to new lows
today; it was down 4%. That may be a bad
indicator for the future of this market.
When leaders fail – others follow.
NTSM
Friday the NTSM analysis remained HOLD. Market internals are breaking down and late-day selling continues, so I think the market generally goes down for a while. Of course I have been wrong in my call for a retest of the 1353 so far - that is still my best guess though.
MY INVESTED POSITION
Based on the SELL signal, 7 November 2012, I
moved out of the stock market at 1377 on the S&P 500. Because of the extreme negativity I have
noted from Hussman and others, I am currently invested in a range of near 15%
invested in stocks and I am still holding short positions.
