Who will the contest? The Feds or Mr Market? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 5 December 2014
PRINTER FRIENDLY | ARCHIVES
Who will the contest? The Feds or Mr Market? A  A  A

Baltimore, Maryland

Dear Diary,

A faint breeze flew through the US stock exchanges yesterday. A few leaves fluttered.

But Diary readers want to know: whence cometh the hurricane?

Alas, we get the newspaper no earlier than anyone else. And it always has yesterday's new...not tomorrow's. That leaves us wondering and guessing...and trying to figure out what comes next.

The storm that blew up in 2008 was fundamentally deflationary. It was classic. It was so predictable that we didn't need tomorrow's headlines; the weather forecast was obvious.

After decades of increases to their debt loads, American's staggered under the weight. Then, when house prices fell, their knees buckled and their backs broke.

--- Advertisement ---
Hidden High Potential Companies Revealed!

Are you aware of these Hidden Companies that are giving investors double-triple digit returns?

Some such companies in the past have delivered returns like 217% in 3 Years and 11 Months, 288% in 2 years and 5 months, and 100% in just 1 year 8 months.

And since they have such high potential, very soon every investor would want to invest in companies like them.

So act now and be the first to invest in them to get maximum returns!

Click here for full details...
---------------------------

Wisely, households cut spending and reduced borrowing. But they are still heavily in debt. In 1971 - before the big debt bubble began inflating - American households had $5 of income to every $4 of debt. Now, for every $5 of household income they have $12 of debt. That's down from the 'peak debt' of 2007 - at $13 for every dollar of disposable income, but still much more than the historic average.

The feds' response to household prudence was also predictable. After so many years of back-stopping the stock market...and luring consumers and business deeper and deeper into debt...they weren't about to quit. Besides, their theories told them that this was when their help was needed most.

This put the feds and Mr. Market on opposing sides of the big blow. The feds whip the winds up from the south. Mr. Market sends them blowing down from the north. The feds want inflation; Mr. Market wants deflation. The feds want more credit; Mr. Market is ready for a credit contraction. The feds send down torrents of liquidity. Mr. Market mops them up.

This leaves the economy in the center...in the eye of the storm, where it is quiet. Prices seem to be fairly stable. The streets are calm. The sun shines. Restaurants and bars report decent traffic.

Black Friday was a disappointment for retailers, but that was said to be because so much shopping is now done via internet. There are fewer real 'breadwinner' jobs. But, heck, the unemployment rate is down. The economy is sluggish...but the stock market reports clear sailing.

Yet, in any direction, beyond this scene of calm and normalcy, are the strong winds of almost irresistible force pushing against an almost immoveable object.

Zero interest re policies...quantitative easing...deficit spending - all are meant to off-set Mr. Market's dark clouds and fierce tornadoes. If Mr. Market weren't in such a destructive mood, these measures would have already sent interest rates and inflation soaring skyward. Without Mr. Market, there would probably be a super-boom, with the Dow flying up to 25,000...gold at $3,000...and $5 for a Big Mac sandwich.

And if the feds weren't so determined to stop him, Mr. Market probably would have knocked the Dow down to about half what it is today. He would have crushed half of the major Wall Street firms...and you'd probably be able to get a Big Mac for $1 - with fries.

But for now...all is calm. Almost. Mr. Market is counter-balanced by the feds. The feds are holding off Mr. Market.

Who will win this contest?

In the end, Mr. Market will triumph. He always does. He represents the forces of Nature...and the gods. He is the fellow who keeps trees from growing to the sky...who forces prices back to the mean...and who never gives a sucker an even break. And that bell you don't hear ringing at the top of a market? That's Mr. Market not ringing it.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Who will the contest? The Feds or Mr Market?". Click here!

  

Recent Articles:
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Which Gods Will Bring Down the US Empire?
August 17, 2017
Mr Trump is in the White House and the gods are in their heavens; what's not to like?
Will They Haul Off Trump's Statue, Too?
August 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Farm Loan Waivers: Why Bad Economics Makes for Good Politics
August 14, 2017
It is because the negative effects of the waivers aren't clearly visible.