Wednesday, August 11, 2010

"Don't Fight the FED" once the beast of investment maxims - looks like ED

ED = Economic Dysfunction.

[And today August 12, 2010 the NY Times reports on Mr Bernanke's gambit (failing to spot THE housing BUBBLE from 2006/7 and todays Fed use of quantitative easing) here ]

The age-old, penultimate stock investors' maxim - to go ALL in and get fully invested in the stock market - when the Fed is accommodating monetary policy - has been scarily - absent.

It seems to me investors are rightfully wary of:
WHY the Fed has some wares in its balance sheet
WHAT the Fed may have on its balance sheet
HOW much of the above is on the Fed's balance sheet - a rumored, never-been-seen $2T of stuff
WHEN the Fed may - make that must - liquidate same - in order to keep its reputation sufficiently above the swipes and desires of the hard asset crowd

Unlike the disappearing condo's of 1980's Houston the Fed simply can't bulldoze the stuff into oblivion. In contrast to the undeniable fact that the Fed has no need for Cash - whenever it needs cash - nowadays it just turns on the printing presses.

Perhaps the real culprit for investors is NOT the Fed - but the printing presses.

The solution to our current EG problemo is VERY simple:

  1. Cut taxes on employment income (not dividends)
  2. Gummint (Federal, state and local) must - like all commercial enterprises - do more with less
  3. Taxpayers continue to be wary of Gummint fix-the-economy programs - by giving the money back directly to taxpayers - they will like consumers of OLD - likely spend that windfall.
  4. And cut capital gains tax rates for NEW Real estate investments - as penned here fall of 2008.
  5. Bailing out homeowners - many of whom are in negative equity - only tells investors - that transient, steroidal policies will, like all such regimens - wear off - then where will values gravitate? Exactly - back to earth.
Anyone else got a simpler better or rapidly achievable solution - hit me back, lets talk.

Bloomberg reported a few days on 8/24 later "The end of the Greenspan put, now essentially a fruitless Fed" story

Ending the siesta on the US taxpayers dime - one easy to read blog at a time.

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