From the onset of QE2 in 2010, stocks rose despite a weak economy. Investors
believed that stocks would rise either because the economy would improve or
because the Federal Reserve would print enough money to ensure that stocks
would rise - a classic "Don't Fight The Fed" situation. In
fact, Ben Bernanke opined in a Wall Street Journal editorial that a positive
feedback loop would occur from a rising stock market. The positive feedback
loop has not occurred, and the incoming economic data is so weak that recent
communications from the Fed have even acknowledged that it has been "Pushing
On A String." For example:
August 9, 2011 Federal Reserve Board Meeting Minutes Excerpts¹
...In contrast, some participants judged that none of the tools available
to the Committee would likely do much to promote a faster economic recovery,
either because the headwinds that the economy faced would unwind only gradually
and that process could not be accelerated with monetary policy or because recent
events had significantly lowered the path of potential output. Consequently,
these participants thought that providing additional stimulus at this time
would risk boosting inflation without providing a significant gain in output
or employment.
August 26, 2011 Ben Bernanke Jackson Hole Speech²
...Notwithstanding these more positive developments, however, it is clear
that the recovery from the crisis has been much less robust than we had hoped.
From the latest comprehensive revisions to the national accounts as well as
the most recent estimates of growth in the first half of this year, we have
learned that the recession was even deeper and the recovery even weaker than
we had thought; indeed, aggregate output in the United States still has not
returned to the level that it attained before the crisis.
Though the Federal Reserve has already printed $600 billion, the economy has
gained no traction. Economic and financial headwinds facing the economy
are so strong that they have rendered monetary policy ineffective. Therefore,
the global debt problem, weak economic backdrop and corporate earnings will
be the primary drivers of the stock market going forward. These drivers
pose tremendous risk to investors because the stock market is still nearly
100% higher than it was in March 2009. The Fed is out of bullets and
the consensus view will soon be that the Fed is "Pushing On A String" should
they pursue further intervention.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
Circle Us