Ricardo Arroja

David Fry's Daily Market Outlook

David, great role as Devil's advocate. You know, I agree with all the thesis going around about current market manipulation and you're great at showing us how it's happening. BUT, please, give us also a couple of investment alternatives or ways to make money.

Badmouthing the market's rise doesn't generate any kind of alpha if you can't profit from it. I really enjoy this column but the argument is becoming repetitive. If you don't come up with some way to make money, and I'm not talking about relinquishing your bear view, people will stop reading you soon.

David Fry's Daily Market Outlook

Great article Dave!

For years it has been rumoured that the FED and the Treasury are active participants in the stock market. Now, after denying the public to know where M3 stands, it seems clear they are probably doing whatever they can to leverage stocks. Ironically, I think Bernanke is right to be a dovish central banker. He knows that the US economy needs a permanent wealth effect to keep spending afloat. In the late 90's, it was the Nasdaq. After the new millenium, there was nothing and Greenspan/Bush had to rush to emergency actions to avoid a recession. In the process, Greenspan created a Housing market wealth effect. Now, with New Home Sales down 20% YOY, the FED will attempt to lift stocks and create a stock market wealth effect once again. Bernanke is fully aware that with Housing already down and heading lower, stocks HAVE to be positive. If that other shoe drops as well, add in all the private and public debt built over the years, it will be 1929 or 1987 again.

The problem is that in an effort to prevent a BIG disaster from happening, the FED and the Administration will just delay it until one day the disaster becomes HUGE. Let's face it: most governments are bankrupt, most people are bankrupt as well. However, because of on-going credit, both have yet to realize that. Eventually, the party will be over. When that happens, we will have a serious crisis of DEFLATION. Or, if energy prices explode on the upside like Goldman Sachs told us a couple of years ago (by the way, where's that analyst?), we will have a serious crisis of STAGFLATION. In the meantime, let's just remain oblivious to what's going on. Enjoy the good times and the fact that the Dow Jones (quite conveniently, a price weighted average index not a market cap weighted average index like the SP or the Nasdaq) is almost trading at a new all time high. Let's just hope those good old Wall Street bankers and brokers, those good old Treasury and FED statistics guys and, that good old Republican party, convince people to jump on the train so that the SP and the Nasdaq can catch up with the Dow. Everyone will be happy. We'll be living in a fantasy world. But, nonetheless, we'll feel good.