Alan
Grayson, Former Congressman from Florida’s 8th District had an
article in the Huffington Post titled "The Fed Bailouts: Money for Nothing.” This was a great, if somewhat scary, summary
of the GAO audit of the Federal Reserve. Some of Grayson’s summary comments follow:
“1)
In the case of TARP, at least The People's representatives got a vote. In the
case of the Fed's bailouts, which were roughly 20 times as substantial (my
comment - unbelievably that’s 16-trillion dollars), there was never any vote.
Unelected functionaries, with all sorts of ties to Wall Street, handed out
trillions of dollars to Wall Street. That's not how a democracy should
function, or even can function.
2)
The notion that this was all without risk, just because the Fed can keep
printing money, is both laughable and cryable (if that were a word). Leaving
aside the example of Germany's hyperinflation in 1923, we have the more recent
examples of Iceland (75% of GNP gone when the central bank took over three
failed banks) and Ireland (100% of GNP gone when the central bank tried to
rescue property firms).
5)
The main, if not the sole, qualification for getting help from the Fed was to
have lost huge amounts of money. The Fed bailouts rewarded failure, and
penalized success...The Fed helped the losers to squander and destroy even more
capital.
6)
During all the time that the Fed was stuffing money into the pockets of failed
banks, many Americans couldn't borrow a dime for a home, a car, or anything
else. If the Fed had extended $26 trillion in credit to the American people
instead of Wall Street, would there be 24 million Americans today who can't
find a full-time job?
And
here's what bothers me most about all this: it can happen again. I've called
the GAO report a bailout autopsy. But it's an autopsy of the undead.” - Alan Grayson
Today,
Wednesday, the S&P 500 went up 0.2% while the VIX rose almost 2%. As I said yesterday, and the day before,
that’s an indication that the Options market is not sold on the direction of
the market since the VIX usually moves opposite to the S&P.
I
saw indications of high call options mentioned on a Discussion board (call
options are on the buy side) so perhaps the rise in VIX will be a happy
event. In theory, the VIX just predicts
the magnitude of future moves in the market; not the direction. In any event, VIX is still falling at a
reasonable rate (over the longer run) and our VIX indicator is still signaling
buy.
Now,
for fun, let’s look at the 1966 Bear Market to see if we are presently
following the Bear Market script. (Engineers
have an odd idea of fun.) We are
11-years into the present Bear market and the correction that ended 25 November
2011 was roughly 29% below the high of this Bear Market (high about 1550 in Sep
2007).
11-years
into the 1966 bear market the Dow made lows 25% below the high of the 1966 Bear
market (high about 1000). The Dow went
on to make a run upward of 16% before falling in another
Bear cycle.
If
we go up 16% from the 1099 low we are in the range of 1275-1300. I don't put too much faith in this sort of analysis, but it is interesting. A lot of experts are suggesting that 2012 will be a tough year, so who knows?
I
think we’ll make 1290 by year-end and that’s up a little from my previous guess.
(It is just a guess – there is nothing in the
NTSM analysis that predicts the future.) I think the Euro mess will continue on as new “final-solution”
agreements are made and this time they’ll keep their pledges…I do have a bridge
I’d like to sell.
The
overall NTSM analysis remains BUY.
I
bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct
NTSM buy signal. I remain 100% long in
the long term portfolio (100% stocks in the 401k.). (See the page “How to Use
the NTSM System” – the link is on the right side of this page).
I
am 90% long in the trading portfolio.
Just a reminder: 100%
invested in stocks is way too much for most rational folks. Don’t do it unless you have a high tolerance
for risk.
