2007/2013: You Will Never Look At The Markets The Same Way Again

Oct. 25, 2013 4:34 PM ETEEM, EFA, QQQ, TLT, VTI, XLP16 Comments
Chris Ciovacco profile picture
Chris Ciovacco

Confidence In Stocks & Economy: Then And Now

In this weekend's article, we tackle three major topics that may alter the way you invest:

  1. How the Fed impacts asset prices.
  2. The market does not care what you think.
  3. Using concepts 1 & 2 to compare 2007 and 2013.

Why Is Wall Street Obsessed With The Fed?

Before we move to the "you decide" comparisons of 2007 and 2013, it is important to acknowledge the Federal Reserve's method for propping up asset prices. The Fed provides a difficult-to-overstate source of indirect demand for financial and physical assets. Here is basically how quantitative easing (QE) works: The Fed prints money, they give the printed money to primary dealers, the Fed gets a bond in return, and presto they have injected new money into the global financial system without having to deal with messy stimulus votes in Washington. The primary dealers (and/or their clients) can do whatever they want with the freshly printed greenbacks, including purchasing stocks, distressed real estate, or anything their hearts desire. That, my friends, is how stocks can go up when the economy is in such a tepid state and why Wall Street is obsessed with the Fed's printing presses. If you want to do some homework over the weekend, this series of videos will allow you to enter the top 1% in terms of understanding what, why, and how the Fed does what it does.

Fed Was Tightening In 2006-2007

Many believe QE is some radically new method of stimulating the economy. QE is really no different than normal open market operations the Fed has used to adjust interest rates for decades. The only significant difference is QE takes place when interest rates are already near zero; which places QE into the pure money printing category. If you want to find

This article was written by

Chris Ciovacco profile picture
Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses. Copy and paste links into your browser: Market Model: http://www.ciovaccocapital.com/sys-tmpl/ccmmarketmodel/ More About CCM: http://www.ciovaccocapital.com/sys-tmpl/aboutus/ YouTube: http://www.youtube.com/user/CiovaccoCapital Twitter: https://twitter.com/CiovaccoCapital CCM Home Page: http://www.ciovaccocapital.com/sys-tmpl/hometwo/

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