Jim Rickards, The Fed Smoke and Mirrors
Jim Rickards explains the December 2012 meeting FOMC of $85B bond buying per month plan.
The floor is yours Jim:
COMMENTS: For the whole of 2013 the fed is out of the market influencing game. They will BUY $40B of bonds and $45B of MBS on to their balance sheet ($1Trillion a year). That's it!
What can the FED do with any stock market down swing? Buy stocks in the market directly or maybe double the bond buying to $170BN. Wouldn't these type of measures confirm the USA is now USSR, if not already. What would extra 'FED' measures do to the gold price and global stability? Would congress approve, would the US people allow it.
Let's compare some numbers:
2012 - US military budget is $700BN (per year)
2012 - Fed balance sheet ends the year at approx $3.5Trillion
2013 - Fed balance sheet expansion $1,000 BN, Fed total balance sheet $4.5Trillion
2014 - Fed balance sheet expansion $1,000 BN, Fed total balance sheet $5.5Trillion
2015 - Fed balance sheet expansion $1,000 BN, Fed total balance sheet $6.5Trillion
2015 - Possible interest bill on FED balance sheet at (say) 5% would be $325BN (if your lucky)...this is half of the military budget of 2012.
The game is now high risk for the FED they can't do much more, if anything. Can stocks go down if fundamentals say it should be so against the bullish argument of massive liquidity? Well hmmm Apple Inc is going down. Then again Bank of America and Citigroup are up with balance sheets of mystery. The Japanese market of the 1990s should be the expectation: massive swings with overall sideways action. A dangerous market for the retail investor (hence this is why they are leaving the stock market) but a play ground for those that can time the swings. Readtheticker.com has the power to time the swings (see our market timing page from main menu.<