I've always said that to get the market's real reaction to actions or inaction of the Federal Reserve you have to wait for the next day, not the two hours after the news. That being the case, yesterday's session suggests Wall Street still doesn't know what to make of the decision to keep buying assets as a form of accommodation ... the question is to whom is the Fed accommodating? Main Street isn't benefiting from the Fed:
> Jobs are scares, and the ones that exist are low-paying or part time or (mostly) both
> Wages are decreasing rapidly
> Home prices are higher but losses not erased
> Official inflation is subdued but the perception is that prices are going higher
In the meantime, where the heck is that $85.0 billion a year going? Half goes to banks to buy assets they don't want, and the other half to federal government to spend money they don't have.
I don't see that money seeping into the general economy. We know the power structure in America values the strength of favored institutions like banks ahead of the masses, which fuels the politics of envy from those that also have very low opinion of the proletariat, but think they can coddle them into a zombie-like submission. In this case, it's all working. The nation is one that's becoming more withdrawn as even the would-be champions of free markets help to fuel the direst warning of Karl Marx- fear, anger and hostility by the masses.
The Fed makes equities more attractive, but that cash they're pumping doesn't go directly into the stock market. There is a more direct route to the housing market but again access to that cash is beyond the reach of Main Street, which hasn't taken the bait anyway. People know they don't qualify for a loan so why bother. So, the rebound in housing has largely benefited well-heeled investors, including a ton of foreign buyers, and not the average person.
Still, there are a lot of people that could buy but would rather rent because they simply don't believe. This week existing homes news release showed first time buyer dipped to 28% of total from 29% in July and 31% last August. Skepticism revolves around the nature of the recovery, direction of government, and worry housing will collapse again really soon. Consequently, Main Street isn't taking the bait. People aren't extending themselves. Credit card use is nudging higher gingerly but nowhere near a pace that speaks to the so-called wealth effect.
It all boils down to failure of policy, and that's why risks should be tapered. Be that as it may, Bernanke thinks he's the only one trying to generate "wealth" and on that score he's correct.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 25th, 2014 | John Ransom