Something Does Not Compute

10 Sep

Something Does Not Compute

You might very well have had a conversation like this recently:

“How can the stock market be at an all time high when the economy is in the tank?  With all this unemployment?  All these people out of work?  All these unpaid mortgages and commercial leases?  With all these bankruptcies?”

“How can the economy be in a depression and stocks are at an all-time high?  It doesn’t make any sense.”

We think you are right.  It doesn’t make any sense.  Except in one very specific and dangerous way.

It only makes sense if the stock market has been ignoring the real economy and is relying instead on endless money-printing support and interest rate manipulation by the Federal Reserve to keep the indices high.

Only then does it compute.  But if that is the answer, then it is obvious the Fed is the towel boy of Wall Street.  

And the hell with the Main Street economy.

But ultimately, the stock market cannot be decoupled from Main Street.  Now there are unmistakable rumblings in the stock market that reality may be about to assert itself.

CNBC summed up the action:  “Stocks fell sharply on Tuesday as another massive drop in tech put the Nasdaq Composite in correction territory and led to the S&P 500’s worst three-day stretch in months.”

Amid the wreckage was Tesla, falling 21 percent on Tuesday.  S&P declined to add the upstart automaker to its S&P 500 index.

Despite the bounceback that followed, is Nasdaq’s ten percent decline a warning that the Fed’s bubble machine is breaking down?  

The legendary hedge fund manager Stanley Druckenmiller says that “the merging of the Fed and the Treasury, which is effectively what’s happening during Covid, sets a precedent that we’ve never seen since the Fed got its independence.  It’s obviously creating a massive, massive mania in financial assets.”  

It will end badly, he says, forecasting inflation rates of 5 – 10 percent in the years ahead.

Druckenmiller is among the Wall Street “smart money” we wrote about back in May who had been buying gold. That turned out to be a good move then.

And it’s a good move now.   That’s because Fed officials, including Chicago Fed President Charles Evans, are signaling that more monetary easing is coming.  That will fulfill Druckenmiller’s forecast.  The more they do to levitate the stock market, the higher gold will go.

Why not avoid the rush?  Contact your Republic Monetary Exchange professional now.