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Does Fed Policy Mean Catch-22 For Investors?

  • Written by Syndicated Publisher No Comments Comments
    July 22, 2013

    The Fed’s ‘transparency’ continues to provide more confusion than clarity, but has set investors up with win-win optimism. Is that realistic or has it put them in a catch-22 position they don’t yet recognize?

    As hedge fund Comstock Partners puts it in an article on Business Insiders this morning:

    “The market is currently cheering the Fed’s continuing monetary accommodation, while at the same time looking for a more robust economic recovery and far higher earnings. The problem is that while investors can have one or the other, they can’t have both.

    A stronger economy means an imminent reduction of QE that the market doesn’t like, while a weaker economy that results in an extension of QE leads to corporate earnings far lower than current forecasts. We therefore think that the current market strength is irrational in the same way as the dot-com boom of the late 1990s and the subprime mortgage boom of 2005-2007, both of which were ignored by investors for lengthy periods.”

    To read the article click here. http://www.businessinsider.com/fomcs-2013-gdp-forecast-is-obsolete-2013-7


    More on Markit’s Latest Global Business Survey.

    In my column yesterday I touched on the latest (June) semi-annual Global Business Survey by giant London-based financial information service company Markit. The survey covers 11,000 companies in 17 countries. Markit reported that the CEO’s of these companies are the most negative since the days of the Great Recession in 2009, with the largest declines in confidence by executives in the U.S. and China.

    Here are some more of Markit’s comments and observations:

    “Interest in the use of economic surveys for predicting turning points in economic cycles is increasing and our Business Outlook Survey uses an identical methodology across all 17 nations covered. It gives a unique perspective on future business conditions from global manufacturers and service providers.”

    “The deterioration in CEO’s confidence in China was driven by service providers becoming the least optimistic since late-2007, meaning optimism is even weaker than at the height of the global financial crisis.”

    “In the U.S. optimism about future economic activity showed steep falls to post-crisis lows among CEO’s in both the manufacturing and services sectors. Gauges of optimism about future business revenues, inflows of new business and profits all likewise fell to new post-crisis lows.”

    “The deterioration in business optimism in the U.S. suggests the pace of economic growth is slowing sharply compared to that seen earlier in the year. . . Any thoughts of an imminent tapering of the Fed’s stimulus are looking premature on this basis.”

    Do Not Plagiarize Our Work!

    I have a reason to repeat this again.

    As has happened periodically over the years, we have received several reports over recent months of others presenting our work as their own by not crediting us as the source.

    One received two weeks ago:

    “Dear Street Smart,

    I read your Street Smart Post blog regularly, and also listen to the radio on Sunday mornings. Did you know that your words are being quoted on the radio on a regular basis, without any mention of you or your blog? In [named city] on Sunday mornings at 8:00 AM, there’s a show they call [named show]. Every other week, an annuity salesman named [person named] of [company named] is on. His strategy is to first try to scare the hell out of his listeners about the stock market, then pitch his annuities. Whenever your Saturday blog has any comments that are negative about the economy or the stock market he quotes your words verbatim, without giving you any credit. He was just on today, July 7, so he won’t be on again until July 21. This morning he quoted your blog exactly about U6 unemployment, Portugal, and the rest of the post. You can go to the [named website] to listen live [in the archives]. I don’t know if you’d be flattered or outraged, but I thought you’d be interested in knowing this.”

    Committing plagiary, and theft of intellectual properties, can be expensive. And we usually hear about it at some point. We’ve had a number of cases over the years and won them all. (The evidence is always quite clear). In one, we even had a money-manager subscriber who was taking one of my weekly columns each month and sending it out to his clients under his own name, as his take on the market or whatever was the subject of the column. On the other side of the country, he probably was sure there was no way we’d find out.

    Not smart. We appreciate receiving the reports, as do our attorneys.

    It’s such a simple thing if verbally quoting our work to add a phrase like, “According to the blog StreetSmartPost.com  . . .”,  or if in writing, by providing a standard credit of the source at the end.

    To read my weekend newspaper column click here:   Smart Money and Public Investors Disagree – Again!

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    Images: Flickr (licence attribution)

    About The Author


    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more.