Volume is low, volatility is dropping and everyone seems to think the worst is behind us.
Quite the opposite is about to occur.
Investors are being blinded by a Fed who are building a wall of money to contain this credit crisis. Printing trillions hoping this monstrosity of bad policy will be swiftly overlooked, and for the most part it has. Never before have we seen the level of support the fed has been willing to give and investors think that is enough. When the Fed backs you, you keep pumping. Because of the broad nature of the assistance, I believe neither Mnuchin nor Powell know, or care about the actual consequences. They’ve cast a wide net in hopes that they’ve solved every problem that will come their way in this crisis. I’m not quite sure if they’re stupid, or if they’re drinking the same Kool-aid this admistration is pumping out. We all know its bullshit and there is no way we see new highs by Q1 of next year. BOTH Mnuchin and Powell should be on the hook for this; Mnuchin for embezzelment and fraud and Powell for accessory to it. They make Bernanke and Paulson look like choir boys.
When the reality sets in, and everyone realizes there will be no V-shaped recovery, it will be too late. The bets being placed now on a speedy recovery are the final nail in the coffin and this time, the fed will be completely out of ammo. With rates stuck at 0 for the foreseeable future, and a deficit well beyond our means, the fed will be forced to ask the Congress again for extra powers akin to socialism. There will be no recovery, no rebound, no making whole of the people.
This is the end of The Great Expansion. The end of capitalism as we know it and most likely the beginning of the end of the United States as a world power and the end of the Dollar as the reserve currency. Dark days ahead.
Should pale death, with treble dread, make the ocean caves our bed, God who hears the surges roll, deign to save the suppliant soul.