"We all know the
Federal Reserve is manipulating the stock market. It does so in two ways:
1. Financial repression: lowering the yield on "safe" assets such as Treasury bonds to negative rates (adjusted for inflation, you're paying the government to park your capital in its bonds), which drives capital into so-called risk assets that offer a yield, for example dividend-paying stocks and rental housing.
1. Financial repression: lowering the yield on "safe" assets such as Treasury bonds to negative rates (adjusted for inflation, you're paying the government to park your capital in its bonds), which drives capital into so-called risk assets that offer a yield, for example dividend-paying stocks and rental housing.
2. POMO and bulk
purchases of futures contracts on the S&P 500 before the market opens.
Studies have found that the majority of gains in the stock market occur on POMO
(one of the Fed's quantitative easing programs) days and on days when large
lots of E-Mini futures contracts are purchased, pushing the markets higher at
the open.
Everyone knows markets in the U.S. and Japan are levitating higher as money is created and pushed (via currency devaluation and financial repression) into stocks.
What nobody knows is the eventual consequence of all this manipulation. Right now the consensus is "don't fight the Fed," meaning stay invested in stocks because they're going higher.
In less-manipulated
markets, we would expect the consensus to eventually be punished, simply
because the market rarely rewards the majority for long. But in
central-planning manipulated markets, the feedback that is the foundation of
open markets has been suppressed."
