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Long-time readers know that for years we have inveighed that there is a huge, historic disconnect between the stock market and the economy due to funny money. Easy Al and now Benito have transformed the stock market and other markets from gauges of the economy to generators of economic activity via their deployment as asset bubbles.

Ergo one must now be a technician to not only navigate and profit in the markets but to insure against a career-ending misadventure, either on the downside or upside.

Yesterday Bernanke said the recession has probably ended. If the recession has ended shouldn’t the Fed at its meeting next week at least stop QE and the massive monetization of mortgages?

Benito: “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time”.

Most everyone realizes that despite Bernanke’s assertion, there is no exit strategy for the Fed and US government so the implementation of an exit strategy is months into the futures.

The problem is inflation is on the march. The usual suspects trumpeted the better than expected retail sales number but ignored the disturbing 1.7% surge in August PPI just as they have been ignoring the record surge in prices paid (inflation) in purchasing manager surveys.

Traders and investors must contemplate what course of action the Fed will announce and enact after next week’s FOMC if ‘the recession is probably over’.

If QE, which is due to expire, is renewed, stocks should rally but commodities, gold and inflation plays should rally far more. The dollar should tank. China should go apoplectic. Benito will look foolish for saying “the recession is likely over”. Bonds might rally initially but then look out below.

If QE is not renewed, stocks and commodities should tank; the dollar should soar and bonds after initially declining should rally. China will be appeased. Benito will have validated his rhetoric with action.

Given that the select few have been informed about coming policy before the non-connected, it is incumbent upon investors and traders to scrutinize the usual suspects for hints about Benito’s next ploy.

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “The King Report: A Tale of Two Cities: Wall Street vs. Main Street; the stock market vs. the real economy”

  1. alfred e says:

    Excellent subtlety and efficient use of a very few words.

    Will the elites be well served and well-informed and the rest allowed to eat cake?

    Or will there be some withdrawal of gov intervention to put the elites “on their own”?

    My guess is the fed and the gov are now joined at the hip. Gov now knows who to serve.

    Cake anyone?

  2. leftback says:

    Brilliant synopsis. Thank you.

    “Will the elites be well served and well-informed and the rest allowed to eat cake?”

    Pass the cake, please, Marie….

  3. AmenRa says:

    All of my comments will now end with “There is no exit strategy for the Fed and USG.” Brilliant.

  4. I-Man says:

    This is what we should all be thinking about for next week.

    Watch for signs of selling into strength…

  5. karen says:

    Exceptionally and simply stated, as well as, everything you need to know. Thank you for the tangent KISS.

  6. mcHAPPY says:

    So which way does Benito go?

    If QE is extending, in the long run, we’re all screwed royally.

    If QE is ended, in the short term, we will feel some serious pain.

    To me it seems obvious.

  7. hopeImwrong says:

    Is there any reason to believe the select few are not already positioning for the USG/FED’s next move?

    Which to me indicates, regardless of any jawboning to the contrary, QE will continue.

    This may incite a stampeed into risk assets and hard assets.

  8. AmenRa says:

    The S&P just keeps on busting through resistance levels as if they’re made of paper (oh wait it is). The weekly TLB is still trending up. Even when the S&P fell to 994 the other week it didn’t take out the weekly reversal price. That’s what I’m waiting for.

    See here: SPX Weekly Fibo&TLB Chart

  9. [...] The King Report: A Tale of Two Cities: Wall Street vs. Main Street; the stock market vs. the real ec… Easy Al and now Benito have transformed the stock market and other markets from gauges of the economy to generators of economic activity via their deployment as asset bubbles. [...]