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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: Sr K who wrote (121877)	9/27/2012 10:21:54 AM
From: RetiredNow	Read Replies (1) \| Respond to of 149317

Sr K, that is absolutely wrong. The stock market and bond interest rates USED TO have pricing signals that could be used to forecast the future of the economy. However, with the Fed's massive money printing schemes they have destroyed all pricing discovery mechanisms in the Treasury market (Fed buys almost all Treasury issuance now with freshly printed money) and will massively distort pricing discovery in the MBS markets as they own more and more of it over the coming years of MBS QE. In addition, Bernanke himself has explicitly stated that he's aiming to prop up the stock market to create a wealth effect...in other words, he has purposely distorted the pricing discovery mechanism in the stock market as well. YOU CAN NOT TRUST prices in any securities markets anymore. The prices are NOT a reflection of supply and demand, risk and reward, cost and benefit, and the underlying economy and companies that make it up. Prices of all US securities are now mostly a function of whatever the Fed happens to be doing lately. This is exactly why I have been saying Bernanke is the most dangerous man in the US. He is single handedly destroying the capital markets through his distortion of the pricing mechanisms. This in turn is guaranteed to drive massive malinvestment in the real economy, which will create bubbles and reduce overall productivity and growth for the long term. So don't for a second think the stock market is predicting where the economy is headed in 6 months. It is now just REACTING to the Fed's latest announcement. I'm trying to be emphatic here, because I think there are a lot of people that are going to be shocked if this market implodes. It may not do so anytime soon, because the Fed has an infinite capacity to print money. In fact, inflation may catch up to us before the stock market contracts. But the number one way to think of the stock market now is that it is nothing more than a casino. It has no fundamental reason for going up or down anymore. It just moves based on whether Bernanke farts or not. Keep that in mind and you can safeguard whatever wealth you may have accumulated.