Will the Fed Rescue the Stock Market? – Ep. 105

Released Tuesday, 25th August 2015
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It wasn't a Black Monday of the 1987 variety, but it was one for the record books
The Dow was down opened downjust over 1,000 points - the biggest intra-day point drop ever
When the market opened down that low, bargain hunters came in for a spectacular rally
Bringing the Dow almost back into positive territory before surrendering those gains and ending the day down 588 points, another 3.5% drop, closing at 15,871
Taking out the 16,000 handle just a few days after taking out the 17,000 handle
All of these drops are being blamed by the media on China
The Dow Jones is down about 11% year to date
After today's drop, the Chinese market was down less than 1%
This is not all about falling Chinese stocks
It's the Fed - Everybody believes the Fed is going to end the party
As we got closer to September, the stock market was already going down
I've said all along that the Fed was bluffing - it is a game of chicken
Finally, today, Barclay's is predicting a Fed rate hike in March of 2016
I think the Fed will launch QE4 before we get to a rate hike in March 2016, which is an election year
The media wants to blame the correction on China, as if there are no domestic problems to worry about
China should be blaming it on us - we're the ones who got the world hooked on zero percent interest rates
The fantasy was that we could raise rates without an impact on the economy
The falling stock market is going to have an impact on the real economy
The economy is weak and getting weaker
This correction will turn into a full-fledged bear market unless we get some official statement from the Fed that they will not raise rates
That may come later this week in Jackson Hole
I am going to be in Jackson Hole at an anti-Fed conference
Here's an example of how ridiculous the "Blame China" rhetoric is:
Maria Bartoromo was talking about the market decline with respect to the China currency devaluation
She actually said that by devaluing the Yuan, Chinese made products will be more competitive against American-made products
America does not produce products that compete with Chinese products!
She's grasping at straws to connect the stock market correction with the Chinese Yuan devaluation
Right now it is positive for America if we can purchase Chinese products more cheaply because we're buying them anyway
Eventually, however, Chinese products will get more expensive when the yuan goes up
She's just trying to fit the narrative because that's what makes everybody feel comfortable
That's why I am not on CNBC and CNN - they realize my comments do not support their editorial policy
I am not talking about Armageddon for the markets - I am talking about the Fed saving the day
I don't think the market is going to crash, but I believe it will go down until the Fed cries "Uncle" and prop up the equities markets with another round of QE
The Federal Reserve did not solve our problems in 2008 - they interrupted the crisis with QE and zero percent interest rates
That crisis would have solved the problem but we kicked the can down the road and we finally caught up to that can
We are resuming the financial crisis that the Fed interrupted from a much deeper hole
Had the Fed raised rates two years ago, we would have been in recession sooner
They should have allowed the markets to solve the problems they caused
Now we have more debt than ever before
I have also been talking about the developments in the foreign exchange markets
The dollar has been strong because rate hikes were expected
The strong dollar has weakened commodities, other currencies and put pressure on emerging markets
We had at one point a 4% drop against the Japanese Yen
The Euro got as high as 117 this morning
The dollar index closed below 93.50, which was a key support
The turn in the dollar index is significant
I expect gold prices to march higher
Gold stocks got crushed today, however,

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Episode Details

Length
23m 2s
Explicit
No

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