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Monday, September 17, 2012
Daily trading of currencies: Submit growing.
Tehran: Protesters chanted "Death to America and Israel"
The protest was organized by a radical Islamist student organization took place near the Swiss Embassy
All because of the movie ... (AP Photo)
Around 500 people protested against the film on Islam near Swiss Embassy in Tehran, which represents U.S. interests in Iran.
The protest was organized by a radical Islamist student organization took place near the embassy. More than 200 riot police and demonstrators prevented firefighters to get closer to the offices whose staff were evacuated from bezbjedonosnih reasons.
Demonstrators waving Korans and photographs of Iranian supreme leader Ayatollah Ali Khamenei, shouting "Death to America" and "Death to Israel."
Attack on U.S. Embassy in Yemen
Hundreds of Yemeni protesters attacked the U.S. embassy in Sanaa on Thursday to protest the film that insults the Prophet Muhammad, and security forces tried to stop them by shooting into the air, according to Reuters.
The attack came after the attack on maerički consulate in Benghazi on Tuesday night, when they were killed, U.S. Ambassador Christopher Stevens and three other Americans.
U.S. President Barack Obama said he would počinico be found and ordered the two destroyers schedules closer to the Libyan coast.
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However, fears that the unrest will spread to other Muslim countries.
Young demonstrators in Sanaa, burned cars before they broke through the main entrance is a well established embassies in the east of the city. Some carried placards that read "Allah is the greatest."
Eyewitnesses report that the injured either on both sides, but does not have any precise information.
Morse condemned film about Mohammed, and violence as a reaction
Egyptian President Mohamed Morse today condemned the "attacks" on the Prophet Mohammed in the film, which has caused tension in the Arab world, but also deplored the violence as a reaction to it.
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"We, Egyptians, reject any type of attack or insult our prophet. Condemn and oppose all those who make insults our prophet," Morse said in a speech broadcast on state television. But, "it is our task to safeguard our guests and all those who come from abroad ... and I urge everyone to take care of it, not to violate Egyptian law in. .. not to attack the embassy," he added.
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Morse had condemned the attack on the U.S. consulate in Benghazi, where on Tuesday evening, killing four Americans, including the U.S. ambassador. "We reject what happened in Benghazi.
We all know that Islam does not accept the killing of innocents. Expression of opinion, free obtestation is guaranteed, but no attacks on private or government property, diplomatic missions and embassies, "said Morse.
"This morning I spoke with the U.S. president and conveyed to him that it is necessary to take firm legal action against those who want to spoil relations between nations, especially between the Egyptian and the American people," he added.
In a telephone conversation with Morsijem, U.S. President Barack Obama called on Egyptian authorities to cooperate with Washington to be responsible for the killing of American ambsadora in Benghazi were brought to justice.
Obama has also called on Egypt to fulfill their obligations to protect diplomatic missions and diplomats of the United States. Bush spoke by telephone with Libyan officials.
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Demonstrators in front of the U.S. Embassy in Cairo on Tuesday skipped the evening embassy wall and ripped the American flag. Further protests today clashed with police, who used tear gas to disperse them.
The Egyptian government last night urged residents to "restraint" in expressing "outrage" over the film about Islam that has encountered fierce criticism and sparked new tensions between Muslims and Copts.
The intention of the author of "Muslims of Innocence" is unclear. According to the Egyptian press, and radical Muslim circles, behind it from the U.S. Copts. The film, shot with a small budget and with amateur costumes and confusing scenario, about the life of Prophet Muhammad which, among other things, the author of the film portrayed as a homosexual and pedophile.
Inkriminarini film was produced by an unknown person threw himself under a pseudonym, which he called Islam a "cancer."
The Islamic Republic and the United States have no diplomatic relations since 1980. years after the kidnapping of Muslim students perform at the American embassy in Tehran.
Written by News online
The widening gap between the U.S. and Islamists in the Middle East
The eruption of violence is the biggest challenge to Obama's efforts to prevent the transformation of the Arab Spring into a new wave of anti-Americanism
The turmoil across the Middle East, Barack Obama offers a chance - albeit risky - to prove himself in the midst of the presidential campaign against rivals less experienced in foreign policy, and that proves to be the president not only to lead the economy.
However, the eruption of violence is the biggest challenge for the efforts of the President of the United States to prevent the transformation of the Arab Spring into a new wave of anti-Americanism - and he has very few options for this.
Clinton: The U.S. government has nothing to do with the controversial film >>>
Less than two months before the election, a wave of attacks on embassies is a major dilemma for the leaders who came to the function of pledging a "new beginning" with the Muslim world, but he struggled to cope with the transformation that brought many dictators who have long dominated in this region.
Moreover, while trying to reject foreign policy criticized by Republican rivals Mita Romnija, Obama is faced with eksalacijom crisis in US-Israeli relations, the nuclear programs of Iran and increase the bloodshed in Syria, where President Bashar al Asad resisted international calls to resign .
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Obama and his aides are trying to find a new approach to violence in the Middle East. Warnings were sent to Muslim governments around the world that are expected to assist in the protection of American interests.
All this simply points to a larger challenge that will exist after the November elections in the U.S. - obviously increase in the gap between the U.S. and all the aggressive Islamist forces in the Middle East, states an analysis by Reuters.
His boastful speech in Cairo in 2009, Obama was hoping to "reset" relations with this region and alleviate the anger that sparked the invasion of Iran 2003rd and rhetoric of the "war on terror", Obama's Republican predecessor George W. Bush.
Drop impact on allies
The Obama administration was caught off guard by the wave of pro-democracy uprising last year that toppled autocratic leaders, some of whom, such as Egypt's Hosni Mubarak, has long been American allies. However, Washington has gradually gave cautious support to the objectives of the Arab Spring movement.
As it appears that a large part of American optimism that accompanied the uprising in the Arab world apparently disappeared forever, Washington is faced with the apparent rise of Islamic activism and influence on the decline of the state that was once considered its allies.
"The game has a lot of elements and it is important that things do not generalize too much," said Hayat Alvi, a lecturer in the Department of Middle East at the College of the American Navy. However, it seems that politics is getting more complicated as we go forward, not only in this region, but here in the U.S.. "
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Rioting, burning flags and vulnerable civilians, reminded of 1979, when Iranian revolutionaries broke into the U.S. embassy in Tehran and took 60 hostages, held by 444 days, which undermined public support for President Jimmy Carter, recalled Asošiejtid pres.
For Obama, the timing of violent demonstrations creates additional complications.
Within the region, Obama is still more popular than many of his predecessors. However, the sight of the destruction of property first American embassy in Cairo and then to Yemen, because of the movie in which insults the prophet Muhammad, has served as a powerful reminder of the potentially violent anti-Americanism, and even how to live.
In the most serious attack killed a U.S. ambassador Christopher Stevens and three of his colleagues in the eastern Libyan city of Benghazi - which was rescued just last year from the forces of late dictator Muammar Gaddafi, intervention by the West during the air Libyan civil war.
Egypt should play a double game
While the Libyan government immediately condemned the attack in Benghazi and pledged to cooperate with the U.S. in the investigation, the initial reaction to the new Egyptian President Mohammed Mursia was inaccurate - has condemned the movie but not the Egyptian violence - which has angered Washington.
Obama's TV network Telemundo announced that the government of Egypt led by Islamists should not be considered a U.S. ally, "but not as the enemy," he added. Obama later spoke with Mursia and sent a clear message that Egypt must cooperate to protect American diplomatic missions.
The White House will closely monitor Mursia action. It could be called into question the fate of foreign aid than two billion dollars a year, mostly military, that the U.S. sent to Egypt, said a source close to the U.S. administration.
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"The Egyptian authorities here can not play any double game," said Ari Ratner, a former member of the Obama administration, an expert on the Middle East and a Fellow of the Truman National Security Project.
"If the government of Egypt, and continues to expect a significant U.S. aid and investment, it must be very clear on acceptance on these events and active work to calm the situation."
Mursi, however, may feel that there is not much choice, and like the government of Pakistan, which is often the target of accusations "for a double play," he has to balance between the superpowers whose support he needs, and extremists - or even ordinary voters - in a country with strong religious or nationalistic attitudes.
Being cautious with the rebels in Syria
Obama has condemned the demonstrators and provocative, though amateur footage that is the protection of the American right to free speech.
The speed at which the attacks on diplomatic missions politicized highlights danger at home for whatever Obama does, especially since ga Romney accuses "apologized on behalf of America." Romney, on the other hand, accused of opportunism in the midst of a national tragedy.
However, feeling the pressure, Obama defended his Middle East policy, and tried to prevent the public opinion turned against him on the matter. "Now I know that it is sometimes hard to watch disturbing images on television because our world is full of challenges," he told a rally in Colorado.
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"This is a tumultuous time in which we live, but we can and will respond to these challenges if we remain what we are and if we remind ourselves that we are different from other nations."
Analysts estimate that ovonedjeljni events at least deepen already great caution regarding further involvement in Syria and to emphasize the reluctance to allow the rebels to reach the more sophisticated weapons.
Author: Angelina Šofranac
Posted: 16/9/2012 1:00
Clinton: The U.S. government has nothing to do with the controversial film
"Let me be clear, and I hope that this is obvious - the U.S. government does absolutely nothing to do with this film," said Clinton during a meeting with the head of Morocco's diplomacy
U.S. Secretary of State Hillary Clinton said that the U.S. government is not associated with the controversial film that has sparked protests in the Muslim world, including the attack on the consulate in Benghazi in which he is killed U.S. Ambassador Christopher Stevens.
"Let me be clear, and I hope that this is obvious - the U.S. government does absolutely nothing to do with this film," said Clinton during a meeting with the head of Morocco's diplomacy in the State Department.
She noted that the administration in Washington rejects the content and sends the message that movie.
"For me, personally, this movie is a hideous and offensive," she said, adding that it appears that the controversial film has "a deep cynical intent - to slander a great religion and anger challenges", according to the agency.
Showing parts niskobužetnog film "Innocence Muslims," U.S. director of Israeli origin sparked protests in several states, and were the most violent in the Libyan city of Benghazi, where he was killed on Tuesday, the U.S. ambassador and three other employees of the consulate.
Passions can not soothe even today bearing in mind that the Islamic groups in several countries have called for another mass protest after the usual noon prayers on Fridays, which is why the U.S. has stepped up security measures at its diplomatic missions around the world.
"We closely monitor developments that could lead to even bigger protests," said White House spokesman Jay Karni.
Continue the attacks on U.S. embassies
U.S. authorities anxiously await new protests across the Muslim world, and in Egypt during the night and this morning, continued demonstration near the U.S. Embassy.
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Egyptian army began building the concrete barricades on the street leading to the U.S. embassy, while at night in several parts of Cairo reported fierce clashes protesters and Egyptian security forces.
Demonstrations are scheduled in Jordan and the Palestinian territories.
Iran's supreme leader Ayatollah Ali Hamneji asks the United States to punish those behind the anti-Islamic film'' Innocence'' Muslims.
A senior U.S. official said the U.S. authorities in coordination with host countries and monitor the situation to prevent any possibility that the demonstration after prayers eksaliraju.
"We are doing everything so that nothing bad would happen, and if it happens that we can react quickly to," said the unnamed official said.
Protests against the film "Innocent Muslims" were held yesterday in 11 Islamic countries, and the fiercest clashes were reported in Yemen, where four people were killed, and Egypt, where more than 230 people were injured.
Thick black smoke over the U.S. Embassy in Tunisia
Thick black smoke rising above the U.S. embassy in Tunis today where police attempted shots into the air and tear gas to disperse more than a thousand demonstrators.
Pillar of smoke about one hundred feet high coming from the open parking embassy said one journalist agency AFP. Several hundred protesters continued shooting at the police with stones and trying to reach up to the building of the embassy.
One demonstrator was able to for a few minutes to pick up a black Islamic flag on one of the walls around the embassy. Strong force of police, army and National Guard were sent to suppress the demonstrators who are still close to the U.S. Embassy.
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The attack was planned in Benghazi
Well-armed militants took advantage of the protests against the anti Islamic films as a cover for an attack on the U.S. consulate in Benghazi, which has been well planned and probably had help from inside Libya to safety structures whose location was known to the U.S. ambassador, said Deputy Minister of Internal Affairs of Libya al Vanis Šaref.
Four people were arrested on suspicion of being performed or participated in the attack on the U.S. consulate in Benghazi, which killed the U.S. ambassador Christopher Stevens and three other embassy officials, reports the AP.
Two of those killed were members of the former Navy Seal. Tajron Woods and Glen Deorti worked as members of the security consulate in Benghazi.
Šaref is said to have carried out two attacks, one in the building at the consulate and the second safe house in which the retired staff.
Šaref added that it is possible that individuals are inserted in the Libyan security forces, reported the location of safe houses attackers.
A police official said that the four suspects were arrested at their homes, and that it can not further to say that they belong to a group and that was the motive for the attack.
Noman Benotman, President of terror organizations Kilij Foundation, based in London, told CNN that the attack on the U.S. consulate was well planned.
"This is not just a folksy protest escalated. According to our sources, the attack was the work of 20 militants who were preparing for him. Contemporary rocket launchers, which on Tuesday was enough, out of peaceful protest rally," said Benotman.
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Surprise attack on the U.S. consulate began on Tuesday evening, when several rounds were fired at the very complex, where the consulate is located on.
One of the employees of private security companies said that he was at that moment was in the yard when he was hit by shrapnel in the leg.
"While I was lying in blood, jumped over the wall one bearded gunman firing into my right leg in two rounds, chanting: You unfaithful, defending infidels," reports the AP.
Ambassador was killed in the first attack
Ambassador Stevens and another American were killed in the first attack.
Libyan forces were then evacuated the other staff in the safe house, located about a mile and a half from the consulate, but until the new attacks came after a couple of hours.
According to Libyan officials, it was considered that there was no chance that the attackers from entering the consulate, because it is surrounded by high walls.
One local journalist from Benghazi say that I incursion into the consulate courtyard started just in time to evacuate Americans.
The attack on the consulate and the murder of the four Americans have sharply condemned U.S. President Barack Obama and Secretary of State Hillary Clinton.
Author: Tanjug
Posted on: 16/09/2012 14:43
Why QE3 Can't Work: Understanding The Liquidity Trap
The Fed's move on Thursday to a massive and open ended injection of money into the U.S. economy certainly had an impact in the short term as traders tried to assess the significance of this new QE initiative. It pushed stocks higher and bonds lower in a rather dramatic knee jerk reaction to the announcement on Thursday. How effective the plan will be over time is a matter for careful consideration.
The markets had moved 8% to 12% higher - depending on the stock or the indices one looks at - over the last 6 weeks. Another percent or two was added Thursday after the Fed's new QE - an open ended bond buying program of unprecedented size - was announced. As a trader I admit to a moment of hesitation as I tried to process the impact. I monitored the stock indices but kept glancing over to bond yields, the metals and crude.
What caused me some degree of confusion was the movement in the bond market. The short end of the curve was falling and the long end rising. The Fed's new program wasn't a sterilized purchase like Twist - we were creating new money here - so the short end of the curve falling didn't make sense. Even more confusing was the long end of the curve. Traders were selling bonds and selling them hard. Why? With the Fed committing to buying mortgage backed securities in large quantities the long end of the curve should be stable or falling I reasoned.
I'm not a bond trader and admit that I don't have all the answers but the movement didn't make sense to me. There was something I wasn't processing about all this. I jumped on the Federal Reserve website and read the statement. It seemed a little ambiguous. I wasn't sure if the plan was to buy the bonds on the open market or if the purchases were a normal QE designed to add additional liquidity to the banking system.
It was important to me to know the answers to these questions. I have done a lot of research on QE's impact to the relevant metrics over the last several years and a program designed to add liquidity to the banking system in my opinion was a non-event as we have been stuck in a liquidity trap since the Fed began QE. The proceeds from those purchases would end up being trapped money - setting on the balance sheets of banks and doing nothing.
On the other hand, if the purchases were going to occur outside the banking system then the impact would be more significant. $480 billion a year injected into the economy is huge - almost 3% of GDP. That would be new money and would leave the total money supply flat even after the "fiscal cliff" tax hikes and spending cuts occurred. The Congressional Budget Office has projected the deficit to be reduced by about $500 billion next year and the Fed was effectively making the impact of the tax increases and spending cuts a non-event - at least from a macro point of view.
I admit to still being a bit confused as to how this new money will impact GDP but for the moment at least I have decided that most of the new money would likely flow directly into the stock market. The aggressive selling of bonds along the long end of the curve suggests to me that these bond holders are dumping bonds and planning to move to stocks and metals anticipating ramped up inflation. There is really no other reason that I can come up with to explain why long bond yields would climb when we already know the Fed has every intention of holding yields down on the long end of the curve.
This is significant in that the Fed's money for these purchases will likely go to banks or institutional investors and therefore be reinvested. If my logic is sound the impact will be diminished as the velocity of this new money will be comparatively low. The Fed buys the securities from a seller - the seller takes the money and buys stock or another asset and that is that.
Perhaps I'm missing something but I'm pretty sure what's needed is to break free from the liquidity trap we are stuck in due to fear and uncertainty and driving stocks and metals higher will not achieve that end. As an analyst, this new QE has increased my fear and uncertainty - not reduced it.
If all that's happening here is that the Fed buys agency securities from institutional investors and banks and the institutional investors and banks in turn buy stocks or gold it will add a modest amount of upward pressure to the price of stocks and gold. It certainly won't flow into the broader economy where the velocity of this money could work to spur significant GDP growth.
$40 billion a month is relatively insignificant considering the total capitalization of all publicly traded companies is in excess of $50 trillion. The possibility is real that these funds will work to drive stock prices higher if the trend is higher to begin with but the dollar amount is probably not enough to significantly alter normal market action or direction. High frequency trading algorithms will absorb and overwhelm the volume created by the Fed's action.
In the end I decided we were still dealing with a liquidity trap. For the Fed's plan to work and break us out of the liquidity trap we are going to need more than a stock market rally. If the market response to the Fed action on stocks and bonds translates to a similar reaction on the part of local banks and consumers the plan will work. If consumers react with more disgust and more fear the plan will fail. It is really that simple.
Perception Must Precede Fact For The Plan To Work
The Fed's plan - although they deny it - is to induce an inflationary environment. Perception precedes fact in this instance. If public perception is that we are entering a period of high inflation two things will happen:
Bank lending will increase
Consumer borrowing and spending will increase
As massive as the Fed's move is from a historical perspective - if my analysis is correct - it will have minimal effect on the broad economy as the money won't flow into the broad economy. Additionally the velocity of this money will be nil since it won't flow into the hands of the broad population where it would be used over and over again as people buy and sell with the money driving GDP.
That leaves the Fed action impotent unless it works to change Main Street's perception of what's to come. That seems doubtful. Notwithstanding the fact that this is a move of huge proportions - a "shock and awe" move - it is doubtful the public will recognize this fact or even care. If not, it is a "dead horse" strategy and you can't win the race on a "dead horse".
There is very little empirical evidence to support quantitative easing as a legitimate strategy to affect the desired result. Japan's experiment with quantitative easing is perceived as a failure and critics are quick to point this out. As Bernanke readily admits in speeches and statements the Fed is learning on the fly as evidence of non-traditional policy impact is limited.
Ben Bernanke's legacy is clearly on the line. Prior to the Fed's announcement I speculated on the odds of a new round of QE and discounted the possibility setting the odds of QE3 at zero - a rather bold and ridiculous assessment on my part in retrospect. My logic was that additional QE would not manage to stimulate bank lending or motivate consumers to shift from a cash hoarding mindset to a free spending mindset.
As a part of my analysis that led me to conclude that the Fed would stand pat I did consider the possibility that the Fed had two choices - do nothing at this point or enter into a massive "shock and awe" stimulus plan. The second choice is wrought with risk. My thinking led me to the conclusion that now was not the time to take big risks. It is the Fed's last bullet in their policy gun. If it fails Bernanke's legacy goes down in the history books as an abysmal failure.
We may not know for some time how the Fed's "shock and awe" stimulus will translate in the broad economy but we can at least look at where we are and attempt to speculate on what the Fed's policy move will mean. I don't think it is logical to give Bernanke a passing grade at this point. This unprecedented move is analogous to being down 3 runs in the bottom of the ninth with the bases loaded and the batter down in the count 2 strikes. Anything less than a homerun is meaningless - the game is lost.
Liquidity Trap
Real economic growth must be built on the backs of the consumer. When consumers hoard cash out of fear no economic expansion will occur regardless of monetary policy.
Karen Murdarsi, in her article, "Keynes and the Liquidity Trap", explains in an easy to understand way what Keynes meant by liquidity trap:
Why did Keynes believe that government spending was the way to break the cycle? To answer that we need to look at the other ways of controlling the economy.
1) The government (or the central bank) can try to reduce the 'price' of money by lowering interest rates. The laws of supply and demand say that low demand reduces the price of goods to a level where people want to buy them. In the case of money that would mean reducing the cost of borrowing, i.e. interest rates. The trouble is that in a recession, people may be so unwilling to borrow and invest that it is impossible to reduce the price far enough. Once interest is at zero, there's nowhere else to go.
2) The government (or bank) could increase the money supply - they could literally (or electronically) print more money. The idea is that this money will work its way around the economy, allowing people to spend and invest more, and increasing employment. The trouble is that when times are bad people want to hold on to their money. They don't want to invest it in stocks which might fail, or spend money on goods and services when they fear it will leave them short later. They feel safer holding on to money in 'liquid' form (CASH) which means that all the new money released is hoarded by nervous banks and savers, and does nothing for the wider economy. This is what Keynes identified as "the liquidity trap".
The chart below clearly shows that through QE1, QE2 and Twist America's recovery has been stuck in a liquidity trap. What is particularly interesting about this chart is that M2 and the Saving component of M2 were closely correlated from the beginning of 2007 until the Fed started QE1 in November of 2008. From that point forward the Savings portion of M2 moves higher at a much faster rate
Perhaps we cannot conclude with certainty that the Fed's QE programs were the motivation behind our sudden propensity to save. What we can conclude with absolute certainty is that the Fed's QE programs did nothing to quell our fear since American's started a process of systematic savings that has continued without a slowdown from the time QE began until the present.
The next chart shows the real impact of the liquidity trap. This chart shows the spendable cash in the economy - cash that drives GDP growth. Spendable cash is calculated by subtracting the Savings component from M2. Take note of the fact that real spendable cash actually fell from $3.963 trillion in November, 2008 to $3.589 trillion today.
Looking at just this single metric it is clear that monetary expansion has not achieved its intended result. The Fed's balance sheet has increased by approximately $3 trillion since they started QE. Almost all of that went into savings - not into the general economy where its effects would be multiplied as it moved from one hand to the other. Money velocity has a multiplier effect on GDP growth. As money changes hands it is spent again and again the result being a single dollar might translate to $5 or even $10 in GDP.
Let's look at another metric - unemployment. There is a very strong correlation between the chart above reflecting the reduction in spendable money supply - resulting from an increase in the rate of saving - and the U6 Unemployment Rate. Spendable income peaked and started its descent in the 1st quarter of 2009 at the same time that U6 unemployment rate started its climb.
The take away from all this is that for the new "shock and awe" plan to have it's intended effect we have got to break free from the fear and uncertainty that has gripped the nation since the recession. To date we have made no progress at all in any of the major metrics that we look at. As Keynes states:
".. if Investment exceeds Saving, there will be inflation. If Saving exceeds Investment there will be recession. One implication of this is that, in the midst of an economic depression, the correct course of action should be to encourage spending and discourage saving. This runs contrary to the prevailing wisdom, which says that thrift is required in hard times. In Keynes's words, 'For the engine which drives Enterprise is not Thrift, but Profit."
Where's The Market Going From Here?
From a trader or an investor's perspective what we need to figure out is whether or not we should ride the "Bernanke bull" or get off now. It's been a nice ride for the last several weeks but can it continue.
My conclusion is that even under the best scenario - a massive increase in inflation - we have probably priced in the full effect. In other words if the Fed's plan works to raise inflation to maybe 4% - which is in my opinion the outside limit of inflation expectations even if the Fed policy does shift consumer sentiment - that and more is already priced into the market.
We can momentarily get caught up in the euphoria but really how high can we expect the market to go on the backs of even an overwhelmingly successful outcome where the public jumps in with both feet and starts borrowing and buying with frenzy? Consider that the October low on the spot month S&P 500 futures contract was 1068. Friday's close was 1465 - a 37% increase. There is no way inflation can support that kind of move.
You can argue that the October low was not reflective of the real economy if you want and therefore the 37% move in the market is more reflective of reality. I would take the opposite side of that argument and offer up the following facts as support for my argument:
Depression era unemployment numbers.
Flat GDP growth.
Liquidity trap that is locking up all Fed stimulus money.
Pending fiscal cliff issues.
Eurozone recession.
China contraction.
Record debt to GDP ratio.
Failed monetary policy.
That's a short list. If the S&P were at the bottom end of the 12 year trading range I might be a little more positive but we are not. We are at pre-recession highs and a comparison of economic metrics today versus when we were at these price levels pre-recession provides a shocking contrast in economic health.
I have said we are our own worst enemy as it is only through the collective population's increased confidence that we will start to borrow and spend. The Fed hasn't provided that confidence with their policy moves. On the fiscal side it is the same thing. "We the people" just aren't buying and without us no policy move matters. As long as fear and uncertainty permeate the minds of the people they will be prudent and cautious. As long as that continues we will continue to stagnate as an economy.
Monetary and fiscal policy - had it worked - would have made sense. It hasn't worked leaving us in a far worse position than before these massive stimulus initiatives. Now we are dealing with the added problem of credit downgrades. As bond prices begin to reflect in the downgrades and they will, we have the added burden of a dramatic increase in carrying costs on these huge debts.
In conclusion, I think Ben Bernanke goes down in infamy as the one who created the monetary policy stock bubble of 2012. When will the market bubble finally pop? That's anybody's guess. My guess is this coming week. There is no rational justification for stocks adding on to a 37% gain in a year. Even if one sees the Fed policy as positive the market has already discounted the perceived success of the policy.
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