By Kristina Cooke
NEW YORK | Mon Nov 8, 2010 6:05pm EST
(Reuters) - Three top U.S. Federal Reserve officials on Monday voiced concerns about the central bank's latest efforts to boost the economy, with one warning the Fed's bond buying might need to be curbed to head-off inflation.
http://www.reuters.com/article/idUSTRE6A12IA20101108Read more…
By Emily Kaiser
WASHINGTON | Sun Nov 7, 2010 3:02pm EST
(Reuters) - The Group of 20 is beginning to look more like the G19 plus 1 as emerging and rich countries alike accuse the United States of breaking a vow of unity.
http://www.reuters.com/article/idUSTRE6A62BC20101107Read more…
By Gareth Soloway on November 5th, 2010 4:25pm Eastern Time
The media is finally catching on, letting the public know exactly what the Federal Reserve has been doing for months if not years. I discussed this two months ago and just in the last two days, the media has started to talk about it. What has the Federal Reserve been doing? Manipulating the markets to inflate asset prices. Why would the Federal Reserve want to inflate asset prices? It increases the perceived wealth of the public. When the average American sees their 401k moving higher, they are more likely to spend money. The spending of money then causes more of a recovery itself. The Federal Reserve is attempting to start the cycle or jump start the economy by pushing assets higher artificially.
This is a very dangerous game the Federal Reserve is playing. They are artificially inflating asset prices by pumping massive amounts of money into the system and pushing the U.S. Dollar lower. In reality, the public is gaining little to no real wealth. As the Dollar drops 10%, the markets have increased approximately that amount. The average American does not understand this and will go out and start spending. At least that is the hope of Ben Bernanke.
As mentioned earlier, the media is now finally all over this. The fact that they are reporting this means it is probably nearer the end than the beginning. Why? When the media reports it, the last average investors hear it and invest, thinking the Federal Reserve will push the markets up indefinitely. In reality, they have been doing this since 2008 and have already done another major cycle of it in the last two months. Can the markets go higher? Absolutely. As long as the Dollar continues to move lower, the markets can go higher to a certain point. However, the SPDR S&P 500 ETF (NYSE:SPY) tagged the double top from April 2010 today. This level was at $122.00. Near term, this should be a resistance point.
The markets are extremely strong today based on this continued idea of the Federal Reserve artificially inflating asset prices. It is not a true market any longer but that does not seem to matter. The Dollar is getting crushed, below the 2009 lows. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $21.95, -0.19 (-0.86%).
At the bottom of all this lies another bubble. Just going back to the year 2000, the technology bubble burst, the Federal Reserve lowered interest rates to near zero and created the housing and financial bubble, that then collapsed and they are again at work, pumping more money into the system and making money free to borrow. This will create another bubble. Note that each bubble is bigger than the last. This is a scary thought considering how big the financial crisis was. To gain more insight, analysis, guidance, swing trades and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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By Nicholas Santiago on November 6th, 2010 11:51am Eastern Time
The U.S. government reported a better than expected non-farm payroll report. The economy gained 151,000 jobs according to the headline number. Economists has expected a gain of just 60,000 jobs. This headline number looks like a blockbuster on the surface. However, an argument can be made that the math behind these numbers is a bit fuzzy, to put it lightly. Birth/Death added 61,000 jobs alone. What else would one expect from a government report?
This week the Federal Reserve announced a $600 billion dollar quantitative easing (money printing) plan. This move by the Federal Reserve has rallied the stock markets higher by 13.0 percent since it was announced in late August. Take note of the move higher in the SPDR Dow Jones Industrial Average ETF (NYSE:DIA). When you consider that the Federal Reserve is doing QE-2 plus their permanent open market operations (POMO) this comes to about $120 billion of added stimulus in the economy each month. If things were so great in the economy one would think that the Federal Reserve would take off the training wheels and see if the economy could function on pure supply and demand, however, that is not the case at this time. Oh, I forgot they did that in May and we saw what happened as the stock market crashed on May 6th, 2010. Therefore, these bankers just continue to pump up the liquidity as commodities and markets inflate to the moon.
Gold, silver, copper, cotton, oil, gasoline, and most every other commodity made new highs this past week. For example, note the chart performance of the iShares Silver Trust (ETF) (NYSE:SLV). These new highs are presently being viewed as a positive. Now we must realize that food and energy are excluded from the economic reports that are used by the Federal Reserve. However, cotton is not a food or energy product and it has increased by over 80.0 percent since mid-July. Are these guys joking or what? This is massive inflation that a third grader can understand. Yet the guys with Ph D's, and the MB A's just don't understand this. Oil is now trading over $86.00 a barrel now. What price will crude break the U.S. consumer again? Take note of the United States Oil Fund LP (ETF) (NYSE:USO). It certainly happened in 2008 and it will happen again. These are the same people that said there was not a sub-prime crisis or a housing bubble. Yet they get even more power after a stock market collapse. We have our corrupt politicians to thank for that.
Meanwhile, the large banks are able to borrow money at zero percent from the Federal Reserve. Therefore, the banks can buy U.S. Treasuries and make a 4.00 percent return. They can continue to operate a credit card business where the average interest rate is 16.75 percent. They can also use the U.S. Dollar carry trade to invest the free money that borrow from the Federal Reserve to buy bonds abroad that pay higher interest. And you thought the TARP program was over. The banks get to do all of this to make money while they barely pay any interest to anyone with a savings account or a CD. This is the slap in the face to the American people. That's what we get for bailing out these institutions instead of letting them fail like a capitalist society would have .
If we have learned one lesson from the past three years it is that the government and Federal Reserve are doing more of the same that got us in this mess in the first place. Bailouts and cheap money from the central banks should lead to the next 'mother of all bubbles' once the next one develops and pops. If you don't believe me just look at the price of gold. Note the SPDR Gold Trust (ETF) (NYSE:GLD) . Gold is the only commodity that is really in demand unlike everything else that is being propped up by a weak U.S. Dollar Index. Gold is the one true currency from the beginning of time and it will be until the end of time. However, gold gets taxed as a collectible which is the highest rate around 36 percent. Are you kidding me? Unfortunately, I'm not sure when supply and demand will drive anything in this market as long as it is being artificially propped up.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
