Well the magicians have done their work and no one is buying it. Like I said in today’s podcast, Bernanke and the Fed hinted to more easing yesterday and caused the late jump in the market. I talked to some investors that waved a sigh of relief. Now today we see that the Fed could only keep the dam from breaking for less than 24 hours. The Dow is down nearly 3 percent as is the Nasdaq and S&P.
Why All the Fear?
Essentially the curtain has been drawn and the six shooter is now empty. There are no more tricks the Fed can do and everyone with a clear mind can see it. What QE1 and QE2 managed to do was to mask over some systemic problems in the finances and economic underpinnings of our society in America. By masking them they were pushed forward until now. We see the GDP was less than 1 percent last quarter and both production and manufacturing was down. With chronic joblessness around 10 percent (16 if you factor in discouraged workers) there is no way to deny the economy is sinking back into recession if it ever left.
The S&P Blame Game
What the S&P downgrade did was buy Obama and friends (including Republican House members) with a wand to wave over the market crash. By blaming everything on the downgrade they are hoping to hide the fact that the economy is stalling. We won’t get fooled again. With QE3 or not economic indicators are negative and that means the market will sink whether we like it or not.
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