Friday, September 25, 2015

The Jedi Mind Trick For Stunned Dunces. Just Ended.

Deja Vu from 2007, the Fed subsidized gamblers to take excessive risks, and now is leaving them high and dry...

This just in:
Janet Yellen: Sept. 24, 2015:
"If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession. In addition, continuing to hold short-term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability. For these reasons, the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data."

Inappropriate risk taking? Only six years' worth...
52 week range of average stock (red) with interest rates (black)

ZH: Sept. 25, 2015
“The Fed cannot permanently raise stock prices”

"Yellen’s speech should quickly begin to hurt over-priced financial assets"

How soon is today?

Fed dunces want to raise rates BEFORE the stock market peaks. Otherwise "it's too late".

Too late visualized:
The last two times that monthly momentum (MACD)(lower pane) was at these levels, interest rates (black line) had peaked months and years prior:

The Fed "put" (option) was only ever a gambler fantasy, born of the 1987 crash when Greenspan eased policy after the crash. The mythical put did nothing to ease the -50% loss in 2000, nor did it prevent Lehman and that -55% loss. 

In other words, the Fed "put" does indeed exist, but at a level far below the current market.