iBankCoin
Read Scott here on iBankCoin and also at http://www.createcapital.com/
Joined Jan 19, 2010
717 Blog Posts

What If…

There are many people, smart people even, that say the markets multi-year bullish phase is caused by many things other than the FED printing billions of dollars each month to buy some form of debt or another.

My favorite is an article that says the market are up 130% because earnings are up 130% during these few years. Over 80% of the gains in earnings come from the giant TBTF banks as they utilize every trick in the book to show profits. Some of the accounting tricks are truly hysterical. Also, a large portion of the gain in earnings come from the money that Apple has made.

There are even folks who say that the FED is not really printing and buying assets, they are doing some other form of magic that leaves high velocity money in a narrow range. Bullshit. My disclaimer is that I am do not have a PHD in economics.

If the FED Quantitative Easing is a “grand experiment” then I have another experiment to propose within this “grand experiment”.

Let the FED cease QE. Tell Investors that it is over and that the economy is strong enough to stand on its own. You can leave ZIRP, just stop the endless free POMO money every day.

What do YOU think would happen? My guess is that we would drop a quick thousand points and recover most of it quickly, producing a lovely double top. Then Dow 10k.

Your thoughts are welcome and appreciated!

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17 comments

  1. Mr. Cain Thaler

    Fannie and Freddie are now underwriting ~90% of all new mortgages…

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    • Scott Bleier

      Do you think that is something new? And yes, its more than 90% with the FHA

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      • Mr. Cain Thaler
        Mr. Cain Thaler

        I think that before the housing crisis it was only something like ~70%…I use the word “only” loosely here

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    • MX2101

      Gosh, it should be possible soon to use a lifetime Social Security contribution balance as collateral for a zero down Fed sponsored mortgage. Is this too much of a stretch, except maybe that it helps the “little people” too much?

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      • MX2101

        uh….never mind. I may be insane.
        as you were…

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      • drummerboy

        great idea.i would love to leverage my ss coin for property,or another business from scratch. their not ready to think even slightly out of the box……..yet.

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  2. Tonka

    Scot, as someone who has only written about one thing for the last three years, I thought this article might be useful:

    http://blogs.hbr.org/cs/2013/02/break_your_addiction_to_being.html

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    • @gravestonedoji
      @gravestonedoji

      People don’t understand the power of the exponential function.

      Soon, many men come.

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  3. Scott Bleier

    Let me correction your misshapen thought process:

    One can be long stocks while cautious.

    One can make money while being aware of the greatest scam in history.

    Knowing the scam makes you ready to deal with its negative results when applicable.

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    • Tonka

      I don’t deny you’re making money. If you weren’t I assume you wouldn’t be here anymore.

      I just long for the days when you knocked it out of the park, like post flash crash.

      You have so much more to offer than the same endless QE/Fed talk that so many people repeat over and over again online.

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      • Scott Bleier

        I appreciate your reply.

        If you remember, I’ve been talking about this while I was “knocking it out of the park” when very few were talking about it or it being the general consensus. Now it is.

        Value is few and far between at this time and risk is high when markets operate under an overwhelming false premise.

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  4. doo

    Also, start hiking interest rates!

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  5. DirkD

    Thank GOD the economy is fixed, otherwise this chart might make me a little nervous. http://i.imgur.com/xXOJaU6.png

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    • Ken

      Interesting longer term chart. This could all go one for more than a year. A 20% drop is not out of the question sometime soon. I noticed the 50 day is rolling down. I added your chart to my collection. Thx.

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  6. drummerboy

    that was my thought from your last post.who,through out this whole ordeal is the the “only”entity, that prints our paper. they are buying every bad piece of paper they can possibly buy from all the insolvent banks,and there are many zombies still operating as a bank.after they are all flushed,their wont be an “unwind”. because the fed,will then just make their balance sheet cleared. they will repudiate themselves,for their selves.

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  7. Yabollox

    The Fed is in collusion with Treasury to soal up all the excess gravy from excessive deficit spending. The Fed buys treasuries with digitized money, and even kicks back the interest payments because it would be unseemly to make money from the benevolent government. The Fed buys in the secondary market, giving out $ to T-bill investors to buy the new issues from Treasury. It’s a great and simple scheme allowing the Obamas to spend their asses off despite congress trying to whoa them down.

    It’s necessary to be in stocks to keep pace with this scheme. Corporations are profit making machines. As inflation hits and rises you want profit machines that can keep up with the rising tide. Otherwise there’s hard assets, collectibles, PMs, real estate. But don’t be in cash or treasuries when the music stops.

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    • Scott Bleier

      Good analysis.

      I agree to not be in Treasuries when the “music stops”. But cash will be the only place.

      Unless we devalue like Argentina…

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