Tags: Boockvar | stock | rates | Fed

Lindsey Group's Boockvar: Stock Bubble Starting to Deflate

By    |   Friday, 27 March 2015 06:00 AM

The S&P 500 index has dropped this week, and more declines are coming, says Peter Boockvar, chief market analyst for the Lindsey Group.

The Federal Reserve's move toward a tighter monetary policy is pushing stocks down, he tells CNBC. "QE [quantitative easing], for example, enlarges the bubble, and once the air stops going into the bubble, the bubble starts to deflate again."

The Fed ended its third round of QE in October and is now considering when to raise interest rates. Many experts expect the first move to come in September.

"A zero [interest] rate is just an unnatural rate six years into a recovery. The problem is that GDP growth hasn't averaged more than 2.5 percent, so they [the Fed] are stuck in lackluster, mediocre-type growth rate."

The Fed doesn't "have the guts to raise rates — even 25 basis points. Rates went from 5.25 [percent] to zero, stayed there for six years and they can't even raise 25 basis points," Boockvar argues.

"All monetary policy does is pull forward activity. It doesn't create any new growth that wouldn't have happened on its own anyway. So we pulled forward activity and we still can't get out of this. Now we can get out of this if the Fed had any guts, but they don't." The economy grew 2.4 percent last year.

"There will never be a good time to raise rates off zero when you've been there for six years."

Boockvar sees the S&P 500 heading back to its November levels. The low for that month was 2,001, reached Nov. 4.

MarketWatch columnist Paul Farrell shares Boockvar's bearishness on stocks. Farrell doesn't have a whole lot of faith in equity-market optimists.

"Never trust Wall Street bulls, they're lying to you over 93 percent of the time," he writes.
"Behavioral-science research tells us bankers, traders and other market insiders are misleading us, manipulating us."

Farrell doesn't specify how he came up with the 93 percent figure. But he thinks the misleading and manipulating is bound to end in trouble in 2015-16, "igniting another market and economic collapse like 2008." The S&P 500 suffered a 37 percent negative return that year.

The cycles leading to stock market crashes continually repeat, replete with their lying, Farrell says. "Wall Street will keep repeating the same hype, piling it on thicker, deeper, until they finally trigger another meltdown, another crash like 2000, 2008, 1929."

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The S&P 500 index has dropped this week, and more declines are coming, says Peter Boockvar, chief market analyst for the Lindsey Group.
Boockvar, stock, rates, Fed
Friday, 27 March 2015 06:00 AM
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