Why did the Federal Reserve wait till the stock market was closed the day before an options expiration Friday to announce a surprise inter-meeting rise in the mostly irrelevant discount rate?
It know that the Nikkei would sell off (down 2%), as would gold, and that the dollar would strengthen.
The Fed has made a regular habit of surprise announcements during options expiration week.
Given its leading role as enabler of the wealth transfer from the people at large to the money manipulators at large financial companies, the Fed is increasingly raising suspicions that it is little more than completely in bed with those it is supposedly regulating.
Meanwhile, to the extent that we are in a sense back within more normal dynamics of tightening and easing cycles, perhaps more traditional investment rules apply. One of them is to own assets that are:
1. fairly valued
2. attracting support from new investors
3. rising in fundamental value.
In stock land, this typically means finding companies with improving earnings and stable to improving financial position, stock price outperformance vs. the averages, and reasonable valuation (pick your metric).
In bond land, this means finding yield that beats likely price increases adjusted for risk of default.
In the special case of gold, which is officially a form of monetary wealth and which is also an unofficial alternative "money" to huge numbers of people globally, the twin sell-offs after first the IMF announcement that it would sell the rest of its planned 400 ton sale and second this Fed announcement smacks of profit-taking/market manipulation.
Despite a great amount of slack all over the economy, prices are rising. The Fed is once again behind the curve.
Most financial assets are, EBR believes, toxic in the longer run because of the underlying mess that led to the collapse of the largest financial companies in the world in 2008. This was the financial community's Hurricane Katrina. New Orleans didn't come back. The difference now is that the Feds have doubled down on the same cheap money and cheap mortgages that helped create this mess.
Right now, both cash and gold look attractive, the former because it is due to appreciate after getting completely trashed the past few years, and the latter because the Fed is manifestly pro-inflation.
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