Tags: Jim Cramer | James Bullard | Fed | CNBC

Stock Market Has Become Govt-Sponsored Enterprise, May Need Fed Bailout

Stock Market Has Become Govt-Sponsored Enterprise, May Need Fed Bailout

By    |   Tuesday, 22 September 2015 08:18 AM

James Bullard, St. Louis Federal Reserve President, admonished CNBC’s Jim Cramer that, “The Fed cannot permanently raise stock prices.”

Regrettably the first clip doesn’t do justice to the fervor Bullard’s critique.

This writer met Bullard at a conference last spring at which he lamented that the Fed had not acted the previous fall to increase interest rates.

However, the next clip includes the Bullard’s complaint that “to have him cheerleading for low rates 24 hours a day is, I think, unsavory.”

Cramer replied that Bullard “has been trying to raise rates for years now, even though the economy has obviously been too weak to do so.”

He took issue with Bullard based on the fact that he, Cramer, has not liked this stock market, and he argues further that Main Street and housing will be hurt by higher rates.

Cramer insisted he is “not against a rate hike per se,” but for now he agrees with the IMF’s Christine Lagarde that the economy is too weak to do it now.

He blasted the Fed for ignoring his call for lower rates in 2007 and insisted, “I am not a lunatic.”

This writer has warned that the Treasury and Fed have gotten in so deep in boosting the stock market that the market itself has become a government-sponsored enterprise, likely to be bailed out by the Fed.

Bullard went on to tell Becky Quick that the Fed has overshot on stimulus, “and that’s where you’re going to get into trouble.”

He called for a steeper rate of increase than the consensus on the FOMC and proceeded to defend it to Steve Liesman as better for the economy long-term.

Intriguingly, Bullard supports legislation that would call on the Fed to explain to Congress what the basis of its monetary policy is and then report further when it deviates from its plan.

Implicit in what Bullard is saying is that because monetary policy works with a lag, if the Fed waits until there is overt evidence that inflation is getting out of control, it could be too late.

He told Liesman explicitly that if the Fed doesn’t tighten now, it may have to tighten more severely later.

Meanwhile, roughly three quarters of trading days have lately produced triple-digit moves for the day, often with much more ground covered intraday.

John Bogle, legendary founder of The Vanguard Group gave his assessment of the current circumstance, telling Tyler Mathisen that investors should continually build up their retirement funds in what he calls “the great casino.”

Dennis Gartman, publisher of The Gartman Letter, explains to Melissa Lee why he is now bullish of oil. He returns to a theme these articles followed some months ago, which is fracking. First, he wants to get involved with sand, which is “a very important part of the process.”

With oil up from $38 to $48 and contango in place (a positive price structure over a period of months), he notes that sand producers have fallen 85%.

The other area of interest for Gartman is tankers, where he has long been involved in “a wonderful trade, with tanker stocks going from the lower left to the upper right, even when the broad market has gone lower.”

He called this idea “a worthwhile punt,” but the “sharks” on the panel, Guy Adami and Steve Grasso, attacked it.

Paul Cloonan, Portfolio Manager at Pioneer Investments, tells Susan Li that he is positive about the fourth quarter earnings outlook but Financials do not meet his criteria for investment.

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Robert-Feinberg
This writer has warned that the Treasury and Fed have gotten in so deep in boosting the stock market that the market itself has become a government-sponsored enterprise, likely to be bailed out by the Fed.
Jim Cramer, James Bullard, Fed, CNBC
585
2015-18-22
Tuesday, 22 September 2015 08:18 AM
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