Stocks | - Part 2

Ron Paul vs. the Fed

It’s kind of weird seeing Ron Paul doing commercials for Stansberry Research that appear to be running at high volume on selected cable networks while his son is running for president, presently attracting a boatload of criticism for a flat tax plan.

In the interview below, the elder Paul found time to talk to CNBC about the Fed.

According to the accompanying CNBC story, he offers good news for investors:

I think the Fed is very efficient and the Plunge Protection Team is very efficient and they have gained a competence in the market, that the Fed won’t allow this market to drop

From the “pissed off, disillusioned, ex-Wall Street,  independent, intentionally-unnamed, now permanently ex-pat bloggers” who offer up fare at the NotQuant blog comes the image below, prompted by a paper(.pdf) from the Philadelphia Federal Reserve about the supposedly unintended consequences of monetary policy.

Interestingly (but not surprisingly, given the dismal set’s detachment from the real world in cases such as this), economist Makoto Nakjima doesn’t even question whether this particular unintended consequence is really unintended, stating unequivocally:

Monetary policy currently implemented by the Federal Reserve and other major central banks is not intended to benefit one segment of the population at the expense of another by redistributing income and wealth. Any decisions regarding redistribution are considered to be the province of fiscal policy…

Yeah, right.

China Stocks, Circling the Earth, etc.

The financial media is inventing new and interesting ways to talk about the China stock bubble that, almost unanimously, they think is going to get even bigger (perhaps much bigger) before it meets its pin. In this Bloomberg report, they equate the one-year rise in stock market “value” – $6.5 trillion dollars – to circling the earth 250 times with $100 bills.

It is clearly the newbie investors in China that are driving share prices higher (see this illuminating AP story for more evidence of that), but the financial media isn’t helping either. To wit, the Bloomberg story casually refers to the $6.5 trillion change as “value creation” (i.e., “The figure, $6.5 trillion, sums up the value created in just 12 months of trading on Chinese stock exchanges…”) and this serves to legitimize the gains.

Isn’t there a better phrase than “value creation” when referring to mature asset bubbles?

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Young Traders, Fed Rate Hikes, Oh My!

Another reminder of how far removed the financial world now is from what might have been considered normal comes via this Bloomberg story that asks the question of how those new to Wall Street – who only know zero percent interest rates – might react to the first Federal Reserve tightening cycle in a decade, starting sometime later this year (if all goes well).

I never grow tired of looking at former Fed Chief Alan Greenspan’s 2004-2006 “baby steps” normalization campaign that simultaneously restored interest rates to normal levels while fostering the biggest asset bubble(s) known to Man.

The fact that one-third of Wall Street traders only know ZIRP will probably be the least of the financial world’s problems if rates ever do rise significantly since “too low for too long”, while never being acknowledge by central bankers as playing any role in asset bubbles, will surely  lead to all kinds of new and interesting developments.

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