Friday, September 23, 2011

Bernanke Disappoints: Markets Plunge

The market was not pleased with Bernanke's announcement this week on future monetary policy.  All assets were hammered across the board and around the world yesterday as investors rushed into treasuries and cash.  The crushing move down has continued through to this morning.

Bernanke announced, as I discussed in Operation Twist: Complete Analysis, that there would be no more additional money printed now nor did he hint that more was coming.

The Fed is currently still purchasing assets in the open market through "QE lite."  As assets that they own mature (someone pays off a mortgage that the Fed holds), the Fed is reinvesting that money back into the market to keep their balance sheet the same size. 

The markets wanted more, and they now realize they are on their own in the face of the next leg down of America's current depression (which began in December 2007).  All economic indicators continue to plunge and unemployment + housing, the bedrock of our recovery, appear ready for their next move down.

Meanwhile, things in Europe are getting worse by the hour.  Portuguese bonds exploded higher yesterday and the contagion is spreading.  Stocks are falling throughout Europe, led down by the banking system which is coming to grips with its impending doom.

I discussed in detail the status of the European meltdown in European Web Of Debt, and I will be updating the situation as it progresses.

In the actual market, assets are beginning (not there yet) to look attractive to purchase for the first time in years.  My favorite assets...

Canadian dollar
Australian dollar
Brazilian real
Oil
Agriculture
Asian stocks and currencies
Precious metals and miners

...have been slaughtered over the past week, and if we get the real flush out that I have been waiting for since May of 2010, then it will finally be time to begin putting some of your patient cash back in the market.

I will update you when I feel it is safe to re-enter.  In the meantime, hope for lower prices on the strong assets.  Put together your shopping list now.  They will most likely be sold off during another market collapse.

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