Thursday, November 4, 2010

The Fallout Continues

So much for the Fed creating price stability:

All hell has broken loose in the markets following yesterday's QE2 announcement.  Bernanke''s Op-Ed in the Washington Post where he flat out admitted that he wants higher stock prices has created a feeding frenzy for stocks.

The falling dollar following the QE announcement has added more fuel to the fire.  Ben's been successful with his attempt to goose stock prices but it comes at a cost.

The dollar is getting slaughtered:

Gold is soaring as investors "run to the exits" from the US dollar:

Oil is soaring as the currency weakens:

My Take:

Ben's Op-Ed is flawed because the stock "wealth" he is creating is being taken away by a falling dollar.

You need to ask yourself:  If equities rise 1% and the cost of goods rises 2% as the dollar weakens have you really gotten anywhere?

Also, keep in mind that input costs for corporations are going to soar.  Just think what $100 oil will do to the airlines and manufacturers who use this stuff like water as they fly people all over the world and use it to manufacture goods.

This is going to kill the profitability of corporations. 

Stocks love this news today but investors needs to realize there is no free lunch.  What's goosing the markets higher today is going to bite us in the ass tomorrow as our currency gets flushed down the toilet.

Congrats Mr. Bernanke, you have once again pulled the wool over the eyes of the American people.  When this all comes tumbling down I suggest you get on the first plane out of the USA because millions of jobless/penniless Americans will be looking for revenge.


Peter said...

Well if you are one of the elites and your stock portfolio goes up 1% does it matter if the cost of goods rises 2%?

Your stock portfolio is $100 million, but no matter how rich you are you don't spend an equivalent percent in commodities.

So if your stock portfolio rises by $1 mil above, do you spend $1 mil more in food and energy? Of course not.

This is an outright theft from the middle class to the elites.

Samsara Sojourner said...

Those who saved for a rainy day are being drowned in an ocean of government debt. Our own government is destroying the life savings and security of it's own retired people.

Senior citizens entering retirement who are the babyboomer generation are being led to the slaughterhouse. Thank you Ben, you not only know the depression, but you have created one for all of us.

Anonymous said...

"Senior citizens entering retirement who are the babyboomer generation are.."

I can't think of a more deserving generation for this to happen.