you have been lulled to sleep by bernanke-action's direct proportionality to the stock market's performance. just as with mathematical models, we can make predictions in physics and chemistry, etc., with small perturbations around some small range of values with the model, market players for decades (ever since martin zweig wrote, "don't fight the fed.") have been able to predict what stocks, bonds, and the usa economy would do when the fed loosens or tightens short term rates.
well, that is not what the fed is doing anymore. the fed is not working from a model anymore. bernanke's fed is pioneering. it is buying all or almost all the government's debt each month or each quarter. i would caution you to rethink the "long termness" of your comment about bernanke's support for the stock market. perhaps the fed pioneers are just getting started cutting a trail, and they have not arrived at mountains, wide canyons, fast flowing rivers, deserts, or indian territory yet. the fed might have spent all its bullets at the last outpost a few weeks ago at its meeting.
these econ numbers last week were truly a problem for the current and future economy. i looked at a lot of stock charts and popular market-cap-weighted and equal weighted index charts the past few days, and there are a lot of divergences that make me think even the stock market may reconnect with the economy sometime soon. the various charts of QE periods versus the s&p 500/nasdaq's upward performance clearly shows the direct proportionality of QE to stock prices, but those were periods when the economic data was not showing declines for 3, 4, or 5 months. the econ numbers have changed not for the better, and iQE (infinite quantitative easing) pioneering by buying all the debt may not get the stock market's respect to infinity (like maybe not in october). |
