Join        Login             Stock Quote

The Relationships Between Wall Street, The Fed, And Politicians Are Crumbling

 March 14, 2012 01:19 PM

People often write to my company asking customer service to forward emails to me asking how I can remain bearish when stocks continue to rally.

For one thing, I want to note that one can be bearish, but still profit from the "current game," or short-term trends that are in place. For example, while I am ultimately very bearish on the economy and on the markets, I positioned my Private Wealth Advisory clients to profit from the various trends of 2011 so that we saw a 9% return for the year vs. a 0% return for the S&P 500.

Having said that, the big picture reason why I'm bearish can be expressed as follows: the current situation that is allowing the market to rally is based on relationships and policies that are crumbling.

[Related -Why it’s time to sell Microsoft]

The relationships that most matter for stocks are those between the Federal Reserve, Wall Street, and the White House (the topic of today's research).

The policy that matters most is the Fed's ability to convince the market that it can and will keep the markets up without letting inflation get out of control (we'll address this tomorrow).

Regarding the relationships that matter, I've stated for months now that we are going to see them crumble. This process has already begun in the sense that we've seen:

1)   Key Wall Street players hiring famed defense attorneys (Lloyd Blankfein of Goldman Sachs) in preparation for future litigation.

2)   The Fed distancing itself from its responsibility for the Crisis by:

    1. Suing Goldman Sachs
    2. Opening itself to Q&A sessions and townhall meetings
    3. Having "pro Fed" editorials written in the Wall Street Journal
    4. Putting the blame for the Crisis and the US's financial weakness on Congress's shoulders

[Related -JPMorgan Chase & Co. (NYSE:JPM): A Look At Underlying Growth Drivers]

3)   Various members of Congress (especially Ron Paul) and GOP Presidential candidates taking aim at the Federal Reserve.

Do not, for one minute, believe that the folks involved in the Crisis will get away with it. The only reason why we haven't yet seen major players get slammed is because no one wants the system to crumble again. And the only way for the system to remain propped up is for the Powers That Be to appear to have things under control and be on good terms with one another.

However, eventually things will come unhinged again. Whether it's Europe collapsing, or the US facing runaway inflation, or another stock market crash, etc, something will break and the Financial Crisis of 2008 will begin anew.

When this happens, the relationships between Wall Street, the Fed, and the White House will crumble to the point that some key figures are sacrificed.

Indeed, this process is already starting.

Next Page >>12


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.