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Graham Summers
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Graham Summers is Chief Market Strategist for Phoenix Capital Investment Research, an independent investment strategy firm based in Washington DC with clients in 56 countries around the world.
My company:
Gains Pains & Capital
My blog:
Daily Market Alert
  • The Terrifying Reality Of The Fed's Decision Making Process 0 comments
    Jul 17, 2014 1:49 PM

    The Fed is a money-printing machine that wants stocks to go higher.

    That's effectively all anyone needs to know regarding the Fed's monetary policies. Every other statement regarding the Fed is only accurate for a brief period of time as the Fed continually changes its goals, thresholds, and responsibilities almost every other month.

    Throughout this time period only two things thing have been constant:

    1) The Fed has continued to print money expanding its balance sheet.

    2) Stocks have moved higher.

    The reason we suggest this is because, based on the Fed's actions, these are the only sensible conclusions one can come to. The Fed obviously doesn't have any forecasting ability. It didn't predict the Tech bubble, Housing Bubble, 2008 Crisis, Arab Spring, EU Crisis or Housing Bubble 2.0.

    Moreover, we've been hearing that "growth would pick up in the second half of the year" for 5 years now. It has never shown up. Neither has income, full-time employment, the labor participation rate, or anything else that would indicate a strong economy.

    Secondarily, the Fed has proven that it is only too happy to A) ignore reality in the form of any data that contradicts its theories and B) ignore any "threshold" that the Fed itself might establish as a target for stopping the printing presses or raising interest rates.

    After all, the Fed suggested it would stop QE and raise interest rates when unemployment hit 6.5%. The Fed predicted this would happen in 2015 (that terrible forecasting record again). Unemployment hit 6.5% back in the first quarter of 2014. So the Fed dropped its unemployment threshold because said threshold was "no longer meaningful."

    Then there's the Fed's 2% inflation threshold, which we hit last month. The Fed again ignored this, claiming that the inflation numbers were "noise." Now Fed Presidents are claiming that inflation might remain below 2% for several years or that inflation might go above 2% and it wouldn't be a "catastrophe." The way things are going, Janet Yellen should predict that inflation will be between negative infinite and positive infinite sometime in the next 10 years. At least that would be an accurate forecast.

    At this point, one can surmise that the Fed has absolutely no idea what it's doing and is simply making things up as it goes. Moreover, there's little hope of reining in the Fed because even if Congress implementing a "balance sheet size threshold" or "number of QE programs threshold" for the Fed, the Fed would simply ignore them.

    If the notion that the single most powerful entity in the world economy is ignoring warnings signs everywhere and continues to operate based on debunked and delusional academic theories worries you, you're not alone. After all, it takes a special type of ignorance or delusion to ignore the fact that the cost of living is soaring throughout the US today.

    Here are Food prices.

    Here are energy prices:

    Here are home prices:

    And in case you don't own your home, here are rents:

    Inflation is already a reality. It's only a matter of time before it gets out of control and crashes the economy and markets. Stocks love inflation at first, but eventually the rising costs destroy profit margins. We're currently in the first half of this. The second half will be a doozy.

    This concludes this article. If you're looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html

    This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

    Best Regards

    Phoenix Capital Research

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