My comment: Of course this will all end extremely badly. My only hope is that it slaps Bernanke in the face before he leaves office. I really think we have a depression in the making.
Bernanke's Comment : http://www.prudentbear.com/2013/07/bernankes-comment.html And, importantly, the Fed will need to scrap this inflationist doctrine and dangerous notion that our central bank can print its away out of problems. It can’t. As we’ve been witnessing, the Fed can only “print” more and inflate bigger Bubbles. Clearly, there’s too much left unlearned from the Fed’s checkered 100-year history.
Excerpts: I’m sticking to my view that chairman Bernanke moved forward last summer with open-ended QE primarily because of worsening global fragilities. Tying “money printing” to the unemployment rate was politically expedient – yet deeply flawed policy for an economy suffering from major structural issues. U.S. stocks are up better than 20% from last August’s lows, in the face of slowing U.S. growth and a rapidly deteriorating global economic backdrop. Dr. Bernanke, similar to Strong, could not resist the (“coup de whisky”) stimulus expedient a surge in securities prices might provide to vulnerable financial and economic systems. Both were willing to accommodate dangerous divergences between deteriorating economic fundamentals and highly speculative financial Bubbles.
Chairman Bernanke committed another major policy blunder this week. The media focused on his “highly accommodative monetary policy for the foreseeable future is what's needed” comment. While important, I would argue the following statement was more impactful: “If financial conditions were to tighten to the extent that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that.” It was this statement, I believe, that had such a dramatic impact on global markets – the dollar, currencies, the emerging markets, bonds and record U.S. stock prices.
The Fed needs to begin extracting itself from the aggressive market backstop and intervention business. Such a role, as should be abundantly clear by now, only feeds speculative excess and serial Bubbles. The Fed’s $85bn monthly QE has been fueling speculation and exacerbating global financial instabilities – with marginal (at best) benefits. To be sure, injecting enormous amounts of liquidity into a highly speculative marketplace and generally unstable backdrop carries huge risks. The Fed needed to begin winding down this program – a process Bernanke signaled several weeks back. Our central bank should not have been surprised by market reactions.
The Bernanke Fed needed to demonstrate some courage and resolve. Instead, it almost immediately signaled its limited tolerance for even moderate market tumult. “If financial conditions were to tighten” are code words for the Fed being there as necessary with open-ended QE to backstop U.S. and global markets. Bernanke’s Comment came with the dollar at multiyear highs, emboldening the view that he’s there to push the dollar lower as necessary to stem global de-risking and de-leveraging. Bernanke’s Comment emboldened the view he’ll backpedal from any move to reduce stimulus at the first sign of market unrest. Bernanke’s Comment emboldened the view that he and global central bankers will punish sellers of risk assets and reward those that disregard risk and accumulate securities. Bernanke’s comment emboldened those leveraging and taking outsized risks with the view that the Fed and global central bankers will ensure robust securities markets. Bernanke’s Comment further distorted perceptions of risk throughout global markets. Bernanke’s Comment bolstered the “QE forever” camp and provided a green light to further speculation, especially in the U.S. stock market.
Yes my short positions were a trade. I really expected some more downside at first, but once it was clear the sell-off was just another "Oh my gosh the fed is going to taper" sparked sell-offs I got out quick, took some nice profits and added more long positions. Today though I sold all of my C on the pop.
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