Thursday, September 19, 2013

The US FED just gave the junkies more Opium!

Imagine your son or favorite nephew (or any one you love a lot and are in charge of caring for) is hooked on drugs! Doctors have told you that if he continues with this habit, his end is near. There are two ways to cure him of his addiction. One is by taking away his stash of drugs -which will in the short run aggravate his condition and make him more violent and increase your task of caring for him. You may have to probably give up your day job to care for him. A painful process for both. The other way is to say, ”YOLO -You only live once!” and let him continue on his drug habit- in fact supplying him more, to ensure that he is apparently happy, while you can go about your daily business! What would you do?

Now, replace the addict with the “Markets” and yourself with the “US Federal Reserve”. Yesterday the FED decided to keep the taps flowing. What’s flowing out of the tap was once antibiotics for the market (QE). It has now become pure opium! And the markets are cheering that the taps will continue to flow! Come on you faceless Market! The US Fed just said that they are not sure of growth prospects for the world’s largest economy. In fact they trimmed the growth forecast. So what the hell are you cheering about?