Name:   MartiniMan - Subject:   Comments on the stock market for Archie Date:   12/11/2018 12:29:33 PM

With the verbosity post I thought I had missed some long-winded post but apparently not.  I did see Archie's question about the markets and who gets the blame.  First point is I am not sure who he was referring to as to who was to blame for the 2008 financial crisis.  I have long advocated based on facts, logic and reason that the collapse of the housing market and the resulting recession was caused by government distortion of the free markets, especially programs that pushed banks to lend to uncreditworthy applicants.  This distortion was mostly a result of Democrat policies from years past but wasn't corrected by the GOP when they had the chance so they share some of the blame.

As for what is happening now, it is really pretty obvious to all but the most economically illiterate.  Because of the Fed's QE policies over the last 10-15 years the stock market has become addicted to easy money and low interest rates as equities were the only place to find a decent ROI.  Hence, every time the Fed announces a rate increase the markets tank.  The problem with these kind of monetary policies is that at some point the piper must be paid and the Fed uses inflation as the indicator of the need to tighten things up.  So under Obama, the economy never really recovered to the point where they needed to tighten monetary policy because inflation was never a concern.  However, the last two years we have seen a tightening of the labor market which drives up wages and allegedly inflation so the Fed raises interest rates which drives the markets downward.  Combine that with the potential trade war with China, a slowdown in the housing market caused by higher interest rates. etc. and we have a correction.  One thing we know from history is that the Fed is incapable of providing a soft landing for the economy and almost always overshoot in both directions.  That is what they are doing now based on the belief that the economy is red hot and inlation is right around the corner.

That Fed policy has become the engine which drives stock values is yet another distortion caused by the the federal government doing things it was never intended to do with the willing cheers from corporate interests and the investor class.  But sadly that horse has left the barn, crossed the street and is eating the neighbor's grass and getting it back is going to be painful.  So painful in fact that there isn't the political will to do so by either party.  It would start with an independent audit of the Fed.  But that isn't going to happen because politicians of both parties like to use the Fed to cover for their fiscal insanity by propping up markets.  And let's face the reality that the party in power always loves the Fed easy money and the party out of power loves tight money because it tanks the economy and the markets and gives them talking points to bludgeon the opposition.

Now that folks is verbosity.  And I could go on even longer but I will refrain from being even more verbose.