What Daily Fed Interventions Mean For Investors
Yesterday’s article received a lot of attention.
If you missed it, my central argument was that the Fed is now FORCED to engage in endless interventions.
And the worst part is that the Fed did this to itself.
It’s an unpopular opinion, but the reality is that following the 2008 Crisis, the Fed eased monetary conditions for FAR too long.
As a brief review, in answer to the 2008 Crisis, the Fed:
- Kept interest rates at ZERO for seven years
- Printed over $3 trillion in new money and used it to buy assets from Wall Street
- Engaged in endless verbal intervention, promising additional stimulus whenever the financial markets began to roll over.
The Fed did all of this for SEVEN years (from 2008-2015) – even though there was clear evidence that it could have started normalizing policy as early as 2011/2012.
The end result?
The financial system is now addicted to Fed interventions. Put another way, the Fed can never stop intervening without inducing a crisis.
And if you think that’s an extreme statement, consider the last time the Fed attempted to normalize policy. The corporate debt market began to freeze and stocks collapsed over 20%, entering a nosedive that would have very quickly become a full-scale crash.
Again, the Fed is trapped. It now has no choice but to intervene in the markets on a daily basis.
And we’re not talking about small interventions either. The Fed has an overnight repo program through which it provides $120 billion to the financial system every single night.
(For simplicity’s sake, repo operations occur when banks do not have the required levels of liquidity. They can “park” some of their less liquid assets with the Fed in exchange for cash, thereby increasing their liquidity.)
This is running at the same as the Fed’s $45 billion term repo program AND its monthly QE program of $60 billion.
That’s the bad news.
Simply keep reading to learn the good news…
The Last Bull Market of Our Lifetimes
All of these interventions mean that we have a final chance to get REALLY wealthy from the stock market before the next bear market hits.
As I keep stating, I fully believe we are in the LAST bull market of our lifetimes.
See for yourself:
As you can see, there have been THREE bull markets in the last 100 years (identified with green arrows):
- From 1945-1967
- Another from 1983-2000
- The one that began in 2014.
It is important to note that EVERY bull market has ended with a bear market/consolidation period during which stocks went nowhere for DECADES (minimum 15 years).
THIS is why the Fed is intervening so aggressively in the markets. And it’s why you NEED to take advantage of this bull market to ensure you can retire rich with your financial future intact.
And the good news is that I believe we’re going to see an extraordinary bull market run in stocks in the coming months.
2020 is an election year. Perhaps you heard…
No sitting president has lost his re-election bid unless the economy or the stock market were in trouble.
Ford, Carter, and Hoover were all sitting presidents during incredible financial upheaval. None of them made a second term.
Trump knows this.
And he and the Fed are making choices right now that I believe will drive the market to NOSEBLEED levels in the next 12 months.
I know, trade wars with China wage on, impeachment hearings continue in the nation’s capital, and no fewer than 9,300 retail stores (Payless, Dressbarn, Family Dollar, and more) will close by the end of 2019, according to Business Insider.
But hear this: none of that matters.
I’ve been following this story all year. In fact, the roots of the story date back to October of 2018. The forces at play here trump all of that. And the result will be twofold:
- Trump will win the 2020 election in a landslide
- The people who understand how he wins will be in a position to change their financial outlook considerably.
I reveal the full story, including how to profit, in Strategic Impact. Head to that page on the website to learn more.
Editor, Money & Crisis