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Market nose dive

June 21, 2013

If any of you have been following the financial media over the last few days you undoubtedly have noticed that the market has take a vicious beating over the last two days, and you might be wondering why…what happened, and when is it going to stop?

I am going to post some links to some of the article analyzing and discussing what exactly has happened since the Fed’s conference yesterday, but I figured I would also present a more real-world analysis of the events that have occurred.

Basically what has been happening over the last several months especially, is that the Fed has been making direct purchases of government bonds to the tune of $85 billion a month – this is a continuation of the original QE program that was designed to help keep interest rates and help a weak US economy. Since the Fed believes they can scale back the program the economy must be improving. Sounds like good news, but obviously the stock market believes otherwise.

The fact that the market has reacted so violently to even the mention that the Fed will be slowing its purchases confirms the fears of many people, including myself, have been having: the stock and bond markets have become addicted to the easy money policies that have been in place since 2008 and are will have an extremely difficult time making the transition back to a more normalized world.

Free money isn’t ever free

What do you think??

http://www.cnbc.com/

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