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Sunday, September 30, 2012
Fed Myth Dispelled
Time and again, traders are told "don't fight the Fed". But how can one not fight the Fed, when there is fighting inside the Fed itself? Lacker, Fisher, Plosser, Bullard, and George, all came out in the last few weeks publicly opposing QEInfinity. The latest economic numbers are staring the Fed right in the face with increasingly obvious confirmation of its mere impotence. Fed cannot revive a weak end demand, cannot replace a lack of pro-growth policies, cannot stop an upcoming recession. Yes, I am looking for a recession to revisit our great nation, and Fed cannot do a darn thing about it. Q2 GDP grew just 1.3%, Mfg ISM report tomorrow may show fourth straight month of contraction, and durable goods orders growth is all but gone.
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why not fight the Fed when the Fed is fighting the market? The Fed is a giant whale, but their bet on more credit (more demand for credit and more ability to repay loans) is out of phase with the declines in new orders. How can businesses repay more loans with fewer new orders?
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