Loading ...Yesterday the Fed shocked the market by going back on its tapering plan. The “people” who manage the market response was swift and decisive. Within milliseconds, all equities were bid higher and rates crashed lower. By the time the news had reached California via the internet, the move was over. If that doesn’t plea the importance of moving to the east coast, I don’t know what does.
I just knew that yesterday was going to be a special day when one of my favorite villains, Lloyd Blankfein was on CNBC in the morning. As always, he had nothing valuable to say except; gold is a “relic” and that it has no “real value”. So naturally, knowing that he is a bonofied douche, I purchased IAG (+9.7%) call options, thanks! Few trading strategies pay better than doing the opposite of what Goldman Sachs tells the public to do.
The Fed not tapering did not catch us by surprise. If you really understand what is going on, you know that the Fed had no choice but to continue handing out 80 billion a month to bankers. QE is not about levitating the markets or creating jobs, it’s about preventing total system collapse. The truth that they won’t tell you is that BANKING is no longer a profitable business. Banks CANNOT lend money at today’s low rates and be profitable. The expenses (specially the banker salaries) are not supported by their business. QE is the largest government subsidy that has ever existed.
The Feds plan is simple. Over time, like the next decade, they will try to raise rates to at least 5% so the banks can make money. Clearly, the subsidy train is not going to stop with Janet Yellen. The deregulation queen was one of the eager supporters who dismantled the Glass–Steagall act. For those that don’t know, Glass–Steagall legislation is four provisions of the U.S. Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms. This legislation was put in place after the first stock market crash (which caused the great depression) to prevent future market crashes. So history will repeat itself, not a matter of if, just when.
Today however, is a day for celebration! The market is opening strong to the upside, John McCain is antagonizing Putin, and America is winning (USA, USA, USA). I’m personally thankful that the banker bonuses will be even bigger this Christmas!
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