So what is FED policy to be now that the US economy is faltering and stumbling because the sugar of the liquidity fix is wearing off? Do they restart the presses in what they now know is another doomed effort to jump start a moribund economy of low demand and no velocity of money. Or do they jiggle on the edges to provide a smoother economic slide into the deep of oblivion? Either way water eventually will seek it's own level.

The answer is very simple, if at the end of the day FED credibility is an important factor they jiggle at the edges and let er slide.

And there she is my advice, my solution...you can not stop the inevitable so you have to think of where you want to be when you hit bottom. Your money and your possessions (investments) are essentially gone, blown away in the storm. You can not protect them.

People live with risk, some people live in hurricane or flood territory, others live in tornado country others in earth quake zones and other in forest and brush fire areas. In each of those locals there is the risk of the perfect storm or event coming along that will wipe you out. If you look at a FEMA map they show flood zones based upon frequency of the event. Even in the least frequent flood zone they still do occur, and we just happen to be living in a time where the once in a 500 or 1000 year event is happening right around us.

The question is not if, but how far are we going to fall? That is essentially up to each and everyone of you as part of a collective to face and figure out. It if be, that it is every man for himself (as it stands now with the divisive politics and culture) then it is chaos. If you chose one of cooperation, reliance and trust then at least you will have civility. You can build on civility.

The FED only intervenes to bail out the biggest players and yes, to stabilize the greater economy. The post-2008 safety guarantee you mention is not new, it was always there and was simply revealed during the 2008 collapse. Henry Paulson hands one president a piece of paper demanding 800 billion be infused into the biggest private institutions immediately, with no congressional review or any other impediment. Another 800 billion went in when the next president took office. "Too big to fail" has been in place for decades, we just didn't see it until it had to be implemented in 2008.

My speculation (good word since we're talking about money) about the past two downturns after 8-year presidential terms is based on Wall Street hedging its bets as a new administration comes to town. The big banks don't really care who wins the White House because they have plenty of people on the inside in both parties. (I say they have a Red playbook and a Blue playbook.) What they hedge against is the uncontrollable uncertainty, regardless of insiders, of just how the new administration will handle fiscal policy. Once they begin to see exactly how the new administration will run its fiscal policy (spending, taxes, trade agreements, wars, etc.) then they re-invest, perhaps differently based on the new policies, and things hopefully calm back down as the new president becomes known and predictable. The big investment banks also hedge against the emotional instability of the greater herd out in the market. As we regular investors get nervous about our investments at times like this the big players move quietly to avoid the spooked herd from costing them money. Pull back. Wait and see. It's probably nothing but let's not take any chances. Let's pull back, slowly and quietly, so that when the herd notices it doesn't cost us anything.

The mandate at the creation of the of the FED in 1913 was to stabilize the economy in times of crisis or panic...The FED was created as a result of the panic of 1907. (Never before 2012 has the FED had to become activist because of political dysfunction).

Not gong to say that isn't in the institutional investors playbook as it sound logical that hey would do that. I know that as a matter of fact that institutions use stealth in their entering into and exiting from positions as a course of doing business. In both 2000 and 2008 there were bubble deflation's that were caused by egregious situations in which they were at the mercies of the fates. The situations were out of control.* So that would be my criticism of your model using the last two election cycles, if you go back further into history why yes your model works as a normal course of events.

Today what is the operative paradigm is what NORUSH alluded to, the flight of foreign capital into the USA as an ON THE BEACH STRATEGY. Here one thinks of poor George Armstrong Custer and his men crowding ever closer to the top of the hill as the Indians close in on them.

One thing that I have discussed is the fact that the FED has with QE3 in September of 2012 asserted itself by practically putting it into writing that they will continue with an activist policy till the cows come home in the face of the ongoing political dysfunction. From that point on Equities and RE never looked back. So it really didn't matter who got elected in 2012** nor in 2016. Both candidates HRC the corrupt Wall Street lackey and Donald the BILLIONAIRE bad boy RE developer are essentially business friendly (Icahn is a friend and confident). Just a thought?



* If you want to talk about chaos in the abstract you have to realize that everything is always out of control and that because the pendulum usually only swings in short arcs it gives the illusion that things are in control.

** In late 2011 I surmised that if BO were reelected Equities and the economy would not like that and would react negatively. The FED saw that the economy was crumbling and that bond interest rate were plummeting in 2012 and as a countermeasure instituted QE3 right before the election in September of 2012. As stated Equities rallied from that point on to this day. So in this macro sense it does not matter who gets elected.

But, Its weird - last weekend I was with my daughter - she showed me Pokemon Go and we ran around in the park by my house getting pocket monsters. I saw 2 other people doing it as well and talked to them - hooked, really hooked.

I actually put in an order Sunday night - sold yesterday... almost 50% gain.

I was shocked - I never gamble on short term gains, this was my first 'guess'. But I figured I would just hold for a week and probably at least wouldn't lose any money... wow - am I going to have to pay taxes...

We dug out her old Pokemon cards - she is thinking of selling them on sleazebay - I told her do it now while it is hot - could change tomorrow.

However, I have a lot of apple I bought in '97 - I don't plan on selling until I retire - the taxes would kill me while I am working. It is sort of hard - you think you should sell, but you end up holding and hoping because you aren't ready to sell. I am never sure what I should be doing...

The dialogue on this thread is all good and thought provoking. Quite an enjoyable read.

In the course of all my readings, I think today's world money flows correlate more closely with the mid 1920's than any other period in time. NIRP is affecting and influencing professional money decisions of pooled capital and redirecting it our way. More along the path of Chinese money driving up Vancouver real estate prices to beyond believable prices, but on a much larger scale. Remember the first goal of a professional money manager is not to lose capital. NIRP insures loses so investment will seek a positive yield no matter how little, as it is better than a loss. The managers are paid on monthly/quarterly/yearly periods and they don't get paid for losses. They will not accept negative bond and cash deposit rates. As long as Europe and Japan have negative yields, all the displaced capital from QE bond buybacks will flow our way. Remember that the EU also is buying corporate bonds and that freed capital is not staying in Europe. Dow 40,000 in your lifetime. And again you will not read that on Yahoo.

Wow on July 5, 2016 the 10 year Treasury hit an all time low of 1.375% which superseded it's previous low in July of 2012 of 1.394%. On Friday the 10 year was at 1.55%. Which for all intents and purpose is treading along at all time lows...This desire for a flight to quality is indicative of the fear factor in the Global economy.

Gold is at apx 1339.00 an oz up from 1080.00 at the beginning of the year.

1ST QTR 2016 GDP 3rd est 1.1% growth

Estimate for July 29, 2016 release of 2ND qtr GDP is 2.4%, they usually have been optimistic in their forecasts

Year over year 2016 is forcast at 1.7% growth....Hmm what is that population growth again?

What it all boils down to is that since 2008 there has been no real growth in the economies except for the rate of population growth. So for all the kings men and horses they have not been able to put Humpty Dumpty back together again... and I said that back in 2010.

Pension funds have projected their viability rates at an 8% return. The FED set it up so that institutional investors have a means of making a positive return. Hence Equities are the only real game left in town. The FED also bought up all that mortgage back paper and if you look around certain areas there is a lot of shadow inventory sitting vacant. Yet they are building more...

It is all essentially a rigged game, and the data to justify their moves is smoke and mirrors with a wink and a nod to the savvy guyz who dig below the headline news to seek the truth of the economy. So they ain't really hidin nothin.

The picture ain't a purty pig with lipstick on it neither.

Timeline....at some point either there will be so many USD's floating around the world that they will be regurgitated or their will no longer be buyers of the bond paper they are printing....

The US is set to really start paying off on SS, Medicare and Prescription Drugs as the Boomer retire. .with lower tax revenues they will have to print bonds to the tune of a Trillion a year starting in 2017 or 2018? How long will it be before the buyers knees buckle.. Ohhh yeah I almost forgot the FED can be buyin up that paper on the sly....till they get to 7 Trillion on their balance sheet and then?????

So the game of musical chairs can go on for a few more years...till you cross the threshold of some magic number where a guy will wake up and say...WAIT A FKIN MINUTE HERE??? Wats this shyte of 25 Trillion on the books and how are they gona pay for it???.. Let us call it the awaking or an epiphany.

Lets say 2022....give or take a year or two..this ain't rocket science ya know...

So it goes the USA is like Wimpy who ate the Hamburger yesteryear and has to pay back the money he borrowed to buy it today. Only he ain't got the money.... So no more Burgers for Wimpy and no money for the lender...everybody gets fked except for the dead guyz in the cemetery who lived the life on your dime.

Sorry Tabs....I like this analysis much better!

Yes, all of this is true and accurate. Under normal conditions our markets would have tanked long ago. If anything, we need to fear high inflation. It is coming so prepare yourself. The economy will stagflate. Taxes will rise. Those dollars that were printed and shipped across the globe are coming home now. This creates inflation in assets first and then expands out from there to other categories. Think $15 minimum wage or Starbuck's coffee. This is why fiat currency values are elastic and not fixed. The theft of purchasing power and value is thru currency debasement. Most world currencies are worse than ours, but the dollar is too strong now and it will be ratcheted down so the gap doesn't widen further and jeopardize exports. That is another plus for U.S. stocks.
I'm not a cheerleader for the stock market. I'm just sharing information with you guys so you see the other side of the story, as money flows always dictate the outcome and there is no reason only the 1% should benefit from it.

Tabs -
I agree with you whole heartedly. The game has been rigged since 1913 and we've been getting shafted ever since Lady Liberty was taken off our coinage. I hope I live long enough to see the people take back control of our republic for the benefit of the citizens and not the corporate elite.....

I will disagree on the 1913 perception. Certainly since 2008.

The USA needed the insurance of a Federal Reserve to become the largest and most important economy in the world. Other wise the US would have been left to the vagaries of the economic fates. That would simply not do as it would not inspire confidence. For an up an comer as was the USA during the 19Th century it would do.

Also during most of the 20Th century that insurance policy was not called on to any great extent. Only after 08 was it called into the breech and then it saved our bacon. So the FED gets a pass from me. Somebody has to be the adult in the room.

I at one time thought hyper inflation ala the Weimar. However the demand curve, industrial utilization rate, velocity of money, employment participation rate, and debt load all indicate deflation as the the consumer is tapped out. Ownership of America is what is changing as that finite foreign capital is repatriated back. The American people are going to be left being beggars.

The EU, Japanese, Chinese, and other BRICS economies are not doing well either and it is a flight to stability that they are buying because they are scared shyteless.

So we have inflation in Equities as foreign capital arrives which is offset by economic weakness as there is no demand. At the moment it makes the US appear to be stable with some growth. But that really is an illusion as the underlying economics globally belie that notion.

The masses are broke but it is still expensive to be poor. I'll stick with the stagflation call. The current glide path is about a 10% annual quality of life reduction / year that is being taken out of the average American's lifestyle. Prices will go up on what you need and down on discretionary consumer import goods. Many foreign currencies have dropped near 10% this year already, so there is the deflation offset achieved thru currency manipulation with no consideration to capacity improvements which occur organically over time. This manipulation is all planned and not randomly accidental.

The Federal Reserve violated its founding directives to only purchase corporate bonds to support the economy when the U.S. entered WW I and bought war bonds. That began the slide that was further eviscerated by Roosevelt eliminating different regional Fed interest rates in favor of a single rate to more effectively buy war bonds to support WW II.

We could go on all day with the things they have done to debase the currency system. When the left hand lends to the right hand, it's only fraud if a higher authority says so. As long as they write the rules unchecked and people believe it is all good - life goes on as usual. The basis of credit is man's faith in his fellow man. It all boils down to faith. Quite simple until the Emperor has no clothes .....

But they were brilliant by lending trillions of dollars to foreign entities and countries insuring future demand of dollars plus needed interest. (Tip for the kids - never borrow in a foreign currency as the lender is setting you up to be a debt slave. The exchange rate goes against you and then you owe even more plus turbo charged interest on top).

I find it hard to complain. I have averaged around 10% as long as I have been investing...just staying the course. It beats most other options.

The people getting killed are the folks who time the market...poorly...and those who do not or can not invest. Time and compounding is like magic.

Bump...

4.5 years later and look at what is happening...it looks like what I said back then could have been said about what is happening today..

Morning, Sunshine!

This.