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Stocks rose on Monday as weaker-than-expected factory activity last month supported views that the Federal Reserve will need to keep economic stimulus in place

June 4, 2013

This is the lead sentence in explaining why the U.S. stock market keeps rising while other markets (Japan mostly) have figured out that the gig is about up. So, today it was the old replay of “bad news is good news,” in that this will be more justification for the Fed’s continued intervention (maybe at some point the news will be so bad that that it will justify increased intervention— can you imagine how high the market would go with really bad news?!?). I think this is the definition of being stuck between a rock and a hard place — maybe several hard places! The Fed has argued that their monetary policy is working. If that is the case, then why would there be such a negative reaction to weaning us off the Fed’s stimulus? If the Japanese have lost confidence in their own bigger and better intervention, why do we think our manipulation is different? If there is no danger in the Fed policy, then why are treasury rates increasing so rapidly? If the Fed policy is working, then why does all the hard empirical evidence suggest that is not the case?

Watching all the players in this financial dance is like watching a pathological liar who is the only one who believes his own lies. I want to clearly proclaim, “Sorry, but I’m not buying!”


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