Monday, September 27, 2010

Is the Fed "Goosing" the Market?

I wanted to put this video up today in case you missed it on Zero hedge.  Nice catch Tyler!

Cazenove technical strategist Robin Griffith shouldn't expect to be invited to any of the Wall Street cocktail parties anytime soon after his comments on Europe's version of Squawk Box.

Griffith made a very compelling argument as to why we have seen such an aggressive rally in equities in September.  Mr. Griffith explains that the Fed  intervened into the market this month by using it's POMO operations to buy treasuries off of the banks.

This nice new pile of cash allowed the banks to pile a bunch of dollars into stocks.  This bullish price action then triggers buying from the trading algos as they see prices rising.
This is Ponzi finance at it's finest folks.  If you click on the POMO link above you will see that the Fed made 9 POMO purchases in the month of September.

This gave the banks a nice wad of money to blow on the equities market.  Expect more volatility in coming weeks as more games are played.  With the trading volumes so light it's very easy to "goose" the market as Griffith calls it.

Also note that you are now up 30% if you got into bonds at the beginning of the year.  That's quite a return when you compare it to the measly 4% the S&P is up during the same period.

It's always nice to hear the truth every now and then from one of the pigmen.  It's a rare occasion, but if you look hard enough you can usually find one or two.


Market looks very defensive again today.  Bonds up/stocks down.  Enjoy the roller coaster.  I don't see it ending anytime soon.

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