Let me get this straight…FOMC stops buying securities in the open market and the world falls apart, right? WOW. Are you folk’s economists, traders, or just a bit naive? I get the notion of negative sentiment, large fed balance sheets, “potential” global economic slowdown, and blending the nuances into an applicable portfolio model.
Do you folks really believe that its core, the fed and its respective governors, analysts, modelers, connections to Wall Street, are focused on anything other than returning the US economy back to a something resembling a sustainable growth rate? Seriously.
Has anyone calculated the amount of sheer economic academic years or experience, business know-how, and capital markets exposure that is currently in the fed at this moment? Janet Yellen, by herself, knows more about the economy than most market participants. Spending the majority of your adult life studying and being exposed to economic history and esoteric conditions eventually, even minimally by osmosis, will result in studied analysis and opinions.
For the people about to comment and inquire if I work for the FOMC, any government entity, FBI or the CIA, none of the above. Just want to make sure I get that out into the open.
Macroeconomic perspective: We just spent the last 6 years averting the most significant economic event of in most our lifetimes. If memory serves me right, after Lehman Brothers fell, the economy physically stopped for about 3 days. There was a complete void of activity from the US, to Europe, to China. Banks at that moment would not issue letters of credit for international trade, firms were having difficulty establishing short term debt such as commercial paper, and lending stopped all together. There was no flow of capital, period. In basic economic terms, an economy (global or local) relies on the flow of capital to sustain activity.
Moreover, if TARP, QE’s, FNMA/FRMC conservatorships, forced buyouts did not occur, the economic, financial, and capital markets landscape would be changed to an indescribable reality. Whether we like it or not the actions by our governments and by the governments of other countries shifted the burden away from the financial markets.
The perception of risk changed. Perhaps for the foreseeable future. Whether you believe in Laissez Fair or Keynesian economics, the reality is that central bankers have a serious monitor plugged into to the global economy. No central banker would like to go back to the months of the 2008 crisis.
This includes the fed, ECB, BOJ, BOE, any other acronym in the lexicon of the financial markets. Remember, the main risk is to go back to crisis mode, deflation not inflation, and the loss of flow of capital.
This market may be infused and powered by the fed but what was the alternative.
The reality is that most of these readers are probably short the market and expecting a bit of a payday on their respective positions. Not that there is nothing wrong with being short. Have you been short for the last 5 ½ years in one of the most bullish trends in recent memory?
Realize this: You actually serve as a bullish indicator for the rest of us. The more short you get, the greater and more intense the spikes are in the aggregate. Think short squeeze. Classic.
So you will excuse the positive tone of this statement. No, the world will not end tomorrow morning, no matter how volatile the /es futures are in the Pre-market. VIX being up at 31 for a part of one day in the last several months does not constitute a massive market sell-off. Get a grip.
Judging by the intelligence level of the readers and contributors of this web portal, I shudder to think that this is nothing more than just pure ethos talking. Could Ebola destroy us all? No doubt. Could Germany relapse into the 1930’s economic woes? Absolutely. I am starting to pander a bit, sorry.
No I don’t have my head in the sand. Quite the opposite. A finger on the pulse of the economy. An ear to ground to news and data. And one finger on the “sell my entire portfolio” button. I may be optimistic, not stupid.