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Big Fed Hike and S&P 500 Rallies, Will It Persist After Another Through GDP’s Recession Risks?


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The Federal Reserve announced another massive 75bp rate hike, yet equities gained and the Dollar dropped in the wake of the news. Why? And does the same arithmetic apply should Thursday’s US 2Q GDP update stoke recession fears?

 

 

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As John Kicklightrer pointed out:

10-Yr yield reflects the economic outlook, as a growth measure tool.

The 2-Yr yield reflects the Interest rates moves.

WHEN THE SPREAD INVERTS A RECESSION CAN BE MORE LIKELY.

SO, HOW DID WE GET TO HIGHER INFLATION?

Most economists and financiers forget that IT IS THE MONEY SUPPLY THAT GOVERNS FUTURE INFLATION LEVELS. The FED knows this yet it does the opposite to its control, by having QE for a very long time. Maybe they think they are the gods of the economy..... yet they cannot foretell the effects of QE beforehand or they are trying out a desperate measure to create growth by more and more flooding the market with excess fiat money, WAY BEYOND THE GOODS AND SERVICES DELIVERED.

IT IS BACKWARD THINKING TO THINK GREATER GROWTH WILL OCCUR AND MAGICALLY MAKE THE ECONOMY DO WELL.  YOU CAN LIKEN IT TO GIVING A JUNKY **** MORE AND MORE, TO KEEP HIM HIGH IN AN ILLUSION, THUS KILLING HIM EVENTUALLY. OR, YOU STOP IT AND HE SUFFERS FROM THE WITHDRAWAL EFFECTS WHICH NO ONE SEEMS TO WANT TO CONFRONT AND DO, TO GET HIM OUT OF THAT ADDICTION.

EITHER WAY, IT WAS THE INCORRECT ACTION, OF FEEDING THAT **** IN THE FIRST PLACE. FOR US, THAT MEANS THE OVER-SUPPLY OF THE MONEY. THIS HAS INFLATED MOST THINGS TO EXTREME LEVELS, E.G., STOCKS, COMMODITIES, HOUSE PRICES, ETC.. MOST OF THIS MONEY WAS NOT USED FOR INVESTING BACK INTO DEVELOPING NEW GOODS, NEW DEVELOPMENTS OR BETTER CASH FLOWS AND CASH LEVELS WITH COMPANIES.

MARKETS BOOMING DO NOT REFLECT CORRECTLY A RISING ECONOMY. WE HAD AN ECONOMY GDP THAT HAS AVERAGED LESS  IN THIS BULL MARKET (WHICH HAD REACRED HIGHEST EVER VALUATONS) THAN IN PREVIOUS BULL PHASES AND ECONOMIC GROWTH CYCLES.

EXCESS MONEY HAS GONE INTO THE STOCKS, SHARE BUYBACKS, AND ULTRA LOW RATES HAVE ENCOURAGED HUGE DEBT BUILD-UP WITH COMPANIES, GOVERNMENTS, HIGHEST-EVER MARGIN-DEBTS, EXCESSIVE BETS IN THE MARKETS, WORSE ILLIQUIDITY-BUILD-UP WITH BANKS. WHY, THE FED WAS HAPPY TO CREATE ALL THIS YEAR AFTER YEAR, AFTER YEAR.

LATER ON THE FED IS LIKELY TO SAY: 'Oh, we did not know this would happen', OR, 'this was an experiment', OR,  'this was too complex to see the outcome' OR, 'All central banks have done the same so we all are suffering the same -- not our fault, mate' (i.e., don't take responsibility and resign, and not change any theories we use) etc...

IF ANY SUCH EXCUSES APPEARS ( as similar ones have in past phases ), THEN WHY ARE THEY IN BUSINESS?

THEY CANNOT CONTROL THE ECONMY WELL, AS ALL BOOMS AND BURSTS HAVE SHOWN; AND HUGE LOSS OF PURCHASING POWER HAS SHOWN; AND AS THE TRILLIONS LOST ON EACH CYCLE BY BUSINESSES; AND EVEN THE GENERAL PUBLIC HAVE LOSSES HAVE SHOWN. RESULTS SPEAK FOR THEMSELVES, NOT TALK.

WHEN WILL PEOPLE, COMPANIES AND BANKERS WAKE UP FROM THEIR ILLUSIONS OF BEING EXPERTS WHO "KNOW", YET CANNOT HANDLE OR CONTROL IT?

IN ECOMONICS THEY ARE FINE LAWS WE DO KNOW BUT THEY ARE ABUSIVELY USED. ALSO THERE ARE CHANGING VARIABLES AND EVENTS THAT JUST CANNOT BE PREDICTED IN ANY MODELS. CURRENT FUTURE IS NOT GOOD.

TIME FOR A CHANGE? ARE YOU READY TO CHANGE YOUR PRACTICES AND THEORIES?

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