304% Per Year - Is That Sustainable Ben?

No useful analysis today folks.  We're just going to rant a little bit... have a little fun with numbers, to investigate what's in store for the equities markets in the event that the Fed gets their way.  Which begs the question "When was the last time they didn't?"  It has become abundantly clear that Chairman Bizarro intends to destroy the dollar.  In fact that is what he said.  The last Fed statement on Dec. 12th, read as follows, "In particular, the Committee decided to keep the target range for the federal funds rate at zero to one-quarter % and currently anticipated that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6 and a half percent, inflation between one and two years ahead is projected to be no more than a half percentage points above the Committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored.  The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy."

"At least as long as the unemployment rate remains above 6 and a half percent."   Did you read that part?  "At least as long as..."!  That's what he said!  So since we won't be seeing unemployment under 6 and half percent for another 20 years, Bernanke plans to print essentially forever.  There is less than a snowball's chance in hell that unemployment is going to drop below 6 and a half percent until the entire world has fallen into the abyss and emerged out the other side... years, perhaps a decade or more from now.  It's not particularly difficult to wrap one’s head around the reality that the world's economies are not going to get all fired up again with oil at $200-$300 per barrel and $47 for a loaf of bread.  In case the good Chairman didn't realize it... that's what happens when inflation runs at the rates he's in the process of imposing.  So you ask "And what rate is that Dan?  What evidence do you have that inflation is about to run amuck?"

Well how about this little tidbit:  Since the November 15th low in the S&P 500, the market had risen fairly steadily until December 18th when it closed at 1446.  That was quite the stellar little rally, yes?  But on the 19th of Dec., Santa arrived and took a great big dump on Wall Street.  And down the market came... falling 3.12% during the Christmas week.  You know... just to make Christmas real cheery for American investors far and wide.  But then a miracle happened.  On the last trading day of the year the market gained footing on the promise that perhaps the fiscal cliff might be averted.  All the wannabe actors in Washington took fool full advantage of the lime light and the Congressional Clown Show began in earnest.  Then presto... just in the nick of time the great announcement was made: "Citizens of America, we your leaders have voted.  Let the celebrations begin!  As your representatives we are proud to act in your behalf and make the decisions we think are best for you and our once-proud nation.  We have elected not to do the responsible thing.  We're not going to go over the fiscal cliff.  We have chosen bankruptcy for America.  Yay!  Everyone rejoice!!"  And rejoice Wall Street did. 

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The net result is that since the November 15th low, the subsequent rally into December, including Santa's nasty Christmas week delivery as well as the blast off rally of January, as of the time of this writing the S&P 500 has risen 9.423% in 63 calendar days.  Imagine if gasoline at the pump did the same thing.  Because that's exactly what is going to happen at some point if Bernanke doesn't knock it off. 


To put the latest Wall Street rally into perspective, since the November 15th low, the average daily rate of inflation as measured by the S&P 500 has been 1.001431% per calendar day, compounded.  Do you realize what that rate of inflation for a full calendar year is?  Exactly 68.5465% per year.  True, that’s not quite at the rates that Zimbabwe encountered a few years ago but still, it’s a rate that is not overly comforting.

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And let's not even talk about the bizarre "Yay, we're-going-bankrupt" rally off the low of New Year's Eve.  Suffice it to say that ever since that glorious announcement the S&P has rallied at the rate of 304% per year.  Why... at that rate on Dec. 31 of this year the Dow will be at 38,896.  Geez... that's almost 39,000.  I wonder if that's sustainable?  I tend to doubt it but that's what the goons on Stomp All Over The Constitution Avenue want us to believe.  Nonetheless, even though 69% per year, or even 304% per year, is relatively benign compared to the rates experienced by Weimar and Zimbabwe, the world is still about to endure crushing inflation.  Chairman Bernanke promised.  If the central banks of the world keep this up you are going to have a very difficult time finding the money to fuel up your vehicle in order to take that weekend excursion you had planned for the kids.  Chairman Bernanke promised!  Hell, that's already happening.  In fact it’s going to become increasingly difficult to even feed those children.  Chairman Bernanke promised!  And thousands of Americans are going to starve to death.  Chairman Bernanke promised.

And in case you doubt that Chairman Numbnuts Bernanke made those promises to wreck your grand childrens' futures in order to save his own and those of his cronies, [all of whom are assholes], scroll back to the top of this page and re-read that last Fed statement.  Try to grasp exactly what they're saying.  The stock markets know what it means.  And soon the commodities markets will reflect the same reality.  Get ready folks, the world’s glorious fascist leaders have gone on full blown "screw the rest of humanity" mode.  Gold should be at $4,000 per ounce tonight.  If it weren't for the constant suppression of that market, it would be. 

And while we're on that topic... in the past we have read arguments that some day the price of gold and the value of the Dow Jones Industrial Average would reach parity.  The most common number thrown around back then was $4,000.  4,000 on the Dow and $4,000 gold.  I think we can safely toss that one out the window.  If the Fed thinks they're going to inflate America out of its debt problems without seriously dangerous social consequences they had better lay off the crack they're smokin' over there.  Because if they continue with the program they're currently running, if their goals are achieved, we're going to see gold and the Dow reach parity all right... at $20,000.  And $35 for a 5 lb. bag of rice.  The unwashed masses are ‘already’ sharpening the tines on the old pitchforks Ben.  If I were you I’d knock it off already.  But then again… you have friends to protect. 

But let’s take a closer look at exactly what effect the Fed is having on equities.  If we apply the rate of inflation as detailed above to the Dow (using the lower 69% rate), it would hit 20,000 exactly 270 calendar days from now.  October 15th, 2013.  And let there be no misunderstanding here, the stock markets are not going parabolic because of any fantastic economic performance.  They are going parabolic because the Fed is literally buying the stock markets... bidding them up in order to create the most bizarre illusion ever seen in the history of mankind... trying to make the stupids believe that all is well.  They must be thinking that as long as the equities markets are soaring, the guillotines might be delayed by a year or two... just enough time for the economy to catch some traction and America will be saved.  Is it even possible that they are even remotely close to being that daft?  I don't think so... they know "exactly" what they're doing.  And by the way Mr. Chairman, where is Germany’s gold?

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And for your musical entertainment....

Mr. Joe Cocker is Feelin' Alright - Live in Berlin

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