Federal Reserve Note, 1914, $10,000

Fed Reserve Note 1914

Assault On The Fed

Background

  • Bernanke,  received a minority (22) Republican Senate votes for his reelection as Fed chair last year.
  • Rick Perry has called the Fed actions “almost treasonous” LINK
  • Top two Republicans in both House and Senate have told Bernanke to stop stimulating the economy. (See above LINK)
  • Ron Paul and other Tea Party candidates have called for abolition of Fed.” LINK

Given

  • When Fed stimulus programs first started US quarterly GDP had fallen to between -4 & -5%
  • The benchmark S&P had fallen to 666.
  • 7 quarter years later US GDP rose from -5% to over +3%
  • The benchmark S&P rose from 666 to 1200.
  • Unemployment in same period went from over -700,000 to +200,000 a month.
  • Martin Feldstein [Reagan's Chief economist] Fed stimulus is reason stocks go higher and strong performance of US economy

Republicans/Tea Party Take over congress in 2010

  • Call for no compromise, focus on cutting government instead of stimulating economy, No tax cuts/stimulus for even small business or extension of payroll tax cut. (Obama Jobs plan) They threaten Bernanke.
  • Investors411 warns May 20th that stimulus will run out and downgrades stock outlook. Another downgrade today
  • GDP falls from +3.3% to +1.5% (last quarter), jobs from +200,000 to 0 created each month.
  • There is almost no sign of inflation in the USA as Treasuries are at their lowest ever.- The arguement used against stimulus
  • Richard Koo - warns that every time Japan’s government contracts money supply GDP fell. When government added money/stimulated economy GDP rose.
  • 100% no accident that this economy started to turn as the Tea Party started to rise.

Conclusion - It took the most massive government stimulus ever to bring us out of the Great Depression – World War 2.  Republicans are growing in power and that means a contraction in government spending. The Fed is under assault and they want Bernake’s head and any stimulus to stop. (No QE 3 – No tax cuts for small business)

We are being pulled back into the Great Recession by the withdrawal of stimulus. Both the end of Obama’s $787 stimulus winding down and QE 2′s end – Predicted on May 20th by Investors411. The rise of the anti stimulus (even tax cuts for small business) contract the money supply, Republicans is the catalyst behind this downgrade.

It doesn’t matter if Republicans don’t want any form of stimulus to heap blame on Obama/Bernanke for problems or they are true believers of cut government stimulus/spending and GDP will grow.

As long as the constrict the money supply side gains power, stocks and more importantly the economy will suffer.

Danger Will Robinson Danger Danger

Investors411 The Long Term Outlook is changed to CAUTIOUSLY BEARISH

Today’s meltdown, is only the start if there is no additional stimulus and we continue to contract the money supply then even the old 666 on the S&P could be challenged in the next few years.

The Lost In Space Robot (old TV Show) that shouted when danger was around went off with a huge commotion and shouted

Danger Will Robinson Danger Danger.

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Stocks

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Index Percentage Volume
Dow -2.49% up
NASDQ -2.01% up
S&P 500 -2.94% up
Russell 2000 -3.68%

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Market Analysis

Focus on TechnicalsFundamentalsHFT’s

  • Fed did pretty much what was expected (Operation Twist), but added word “significant “ to downside economic risk. Stocks toasted after Fed announcement and into close.
  • Moody’s downgrades BAC, WF, & C – Entire banking sector (ETF - XLE) huge drop - 4.16% Now directly above major support. If this sector breaks support today BEAR’s RULE
  • HGSI’s Ron Brown (from Paul) reminds us yesterday that the first move after a Fed announcement is often a “head fake.” But he didn’t have two data points above
  • HFT’s & pro’s can make more $$$ if they panic institutions & investors. XLE will break support and shadow banking sector will lead stock lower.

Longer Term Outlook

month, months

  • Repeat Same old mantraMay 20th forecast still stands. The May 20th summer forecast has come to pass and now we wait to see the Fed’s next move. Add to this Europe is a whole lot worse than previously thought back in May. For the Fed to act significantly – inject more liquidity - I’m afraid we need to see stocks do worse for that to happen.

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Paul’s Corner

Looks like the market thumbed its nose at Operation Twist and sharply sold off after the news.  Just a sell on the news or are we in for more trouble?  Ian Woodward posted a great blog last evening with very detailed analysis of what to watch for in the market action.

LINK

All sorts of talk coming out from the Republican candidates on how to create jobs, suggestions range from eliminating the minimum wage, reducing government regulations, lowering corporate taxes and more. Amazon.com has a distribution warehouse in Allentown Pa. Read about how they have created jobs and the new work place conditions we all can look forward to in the new reality.

LINK

HGSI is having another informative webinar next week Sept 28. You do not have to be a HGSI user to benefit from the free webinar. Here are the details:

Join us on Wednesday, September 28th from 8:00 pm until 9:30 pm for “Prospecting and Trading in a Weekly Timeframe” by Ray F Ebert, PhD.

Ray will share his disciplined weekly trading strategies using HGSI and other software. He will provide technical analysis of prospects submitted by the audience.

Earlier this year Ray was selected to be a “Spiker” on SpikeTrade, a trading community managed by Dr. Alexander Elder and Kerry Lovvorn. In his first quarter as a Spiker Ray won first place for equity and second place for points in the weekly competitions. He also leads the Washington D.C. area HGSI User Group.

Register at: LINK

Looking at individual YSL 5 stock action yesterday after the Operation Twist announcement caution is suggested. If you dare to play please use real stops and don’t keep lowering your stop if your stock sells off.  ZAGG is getting toasted at the moment and needs some time to settle down and correct.

Detailed YSL 5 analysis this weekend, maybe. Watch the comments section.

Remember, you are responsible for your investment decisions, and I am not. Please do your diligence, and please take ownership for your actions because I‘m sure not going to.

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I am exiting all long stock positions – Today’s meltdown may rebound, but the long term outlook remains bleak for stocks as long as the folks who want to contract money supply, are gaining power. (I’ll wait on GLD till it hits its stop/sell)

What would change this outlook is more stimulus from our Fed to Europe & USA. A realization that constricting money supply hurts stocks and the economy/GDP growth by a greater segment of the population. Unexpected GDP growth  Europe, emerging markets, USA.

HFT’s are obviously powerful enough to manipulate stocks up and down within a range.

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Long Term Outlook

(for US stocks only – not our economy)

CAUTIOUSLY BEARISH

*Investors411 has 5 different long term valuations - BULLISH, CAUTIOUSLY BULLISH, NEUTRAL, CAUTIOUSLY BEARISH, and BEARISH.

* Everything written in BROWN is a repeat from a previous day(s)

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING

ALL TRADING INVOLVES RISK AND POTENTIAL LOSS OF PRINCIPLE

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