Federal Reserve Chairman Ben Bernanke opened his mouth again on June 7. What did he say? Nothin’. And the market dropped 100 points in minutes.
The market wanted Ben to tell them he was printing lots more money — and fast.
No delay between the end of QE2 and the start of QE3. That should teach Ben a lesson. This market wants printed money. This market NEEDS printed money.
I’ve said it before — this market has NEVER gone up since the financial crisis unless the Fed is printing money. It’s Miracle Gro for the stock market. Without it, the market’s green shoots always seem to get sprayed with Round Up.
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The June 7 collapse was followed by a bad rest of the week that culminated in a very bad Friday. We had a good rebound on Tuesday but today the market seems to have a huge tummy ache — lack of food in the form of printed money!
Although Ben is still printing fast and furious now, just the thought of not having more money at the end of June is causing real hunger pains.
Those down days are the market’s way of teaching Ben they want more money. But I wouldn’t expect Ben to change any time soon.
Barring a major meltdown, Ben would have to wait AT LEAST 60 — 90 days before he announced a QE3. Even then, he may not announce a fixed number, fixed date plan.
It may be more open ended — a commitment to use open market operations focused on longer term securities to maintain market stability and economic growth. Essentially a commitment to print as needed. That would keep the market happy for a while. Until then, expect more volatility on a downward trend, although likely no meltdown.
Of course, all this money isn’t money from heaven. It really will turn into inflation unless you can pull it back, which is Ben’s plan. But even he is beginning to recognize that plan is getting and harder to implement any time soon.
And, if you wait too long, it’s inflation time. That’s another lesson the market is teachin’ Ben. It doesn’t like the idea of pulling money back at all. If it can’t handle Ben’s magical money machine being turned off, it sure can’t handle that money machine becoming a money vacuum.
What’s Ben to do? My guess is that he’ll consider retiring when his current term is over. It’s just not much fun anymore and it’s going to get a lot less fun in the future.
About the Author: Robert Wiedemer
Robert Wiedemer is a managing director of Absolute Investment Management, an investment-advisory firm for individuals with more than $120 million under management. He is a regular contributor to Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here
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