Tags: Farrell | stock | Fed | banks

MarketWatch's Farrell: Stock Crash Coming in 2016 Thanks to Fed

By    |   Monday, 29 December 2014 09:24 AM

The Federal Reserve is in the pocket of big banks, and that means big trouble for the stock market two years from now, says MarketWatch columnist Paul Farrell.

"Today a new Fed boss is following in [former Fed Chairman Alan] Greenspan's ideological footsteps, following the same Ayn Rand playbook that lost $10 trillion of Main Street's money, as she panders to the big five banks that control 90 percent of America's deposits," he writes.

Farrell, of course, is referring to Fed Chair Janet Yellen.

"The next crash is due in 2016, around the presidential election," he says. "Why? Yellen's brain is trapped in the same myopic capitalist dogma that blinded Greenspan for 18 years, forcing him to confess he 'really didn't get it till very late,' long after the $10 trillion market loss was a reality."

The result will be "losses bigger than 2000 and 2008 combined. That could translate to the [Dow Jones Industrial Average] crashing . . . to around 10,000," Farrell predicts.

"The Dow crashing all the way back down to 10,000? Wow. Unimaginable. No wonder our brains tune out. Instead, we prefer the happy talk that will just keep coming out of Wall Street and Washington till 2016. We'll keep denying reality . . . till it's too late, and another $10 trillion loss is in the books."

Meanwhile, with the Fed expected to begin raising interest rates around mid-2015, many investors are looking for stocks that can withstand the moves.

Consider low-volume stocks, which tend to outperform when the Fed tightens policy, say strategists at Goldman Sachs.

During the last 20 years, the return of low-turnover stocks beat high-turnover shares by 8 percentage points during periods of higher interest rates, the strategists, led by Elad Pashtan, say in a report obtained by CNBC.

"Volatility is sharply lower on low-turnover stocks than on high-turnover stocks, providing for a greater risk-adjusted return," they write.

"While seemingly counterintuitive, stocks with very high rates of turnover are more prone to fall during periods of rising volatility and declining liquidity, precisely because these stocks trade more frequently."

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The Federal Reserve is in the pocket of big banks, and that means big trouble for the stock market two years from now, says MarketWatch columnist Paul Farrell.
Farrell, stock, Fed, banks
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2014-24-29
Monday, 29 December 2014 09:24 AM
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