{"id":31200,"date":"2018-02-18T21:46:50","date_gmt":"2018-02-19T02:46:50","guid":{"rendered":"http:\/\/olduvai.ca\/?p=31200"},"modified":"2018-02-18T21:46:50","modified_gmt":"2018-02-19T02:46:50","slug":"the-fed-targets-stock-prices-heres-why","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=31200","title":{"rendered":"The Fed Targets Stock Prices \u2013 Here\u2019s Why"},"content":{"rendered":"
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The Fed Targets Stock Prices \u2013 Here\u2019s Why<\/a><\/h3>\n<\/header>\n
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The week before the Dow\/SPX quickly plunged 10%, the Fed had reduced its SOMA account (the SOMA account is its \u201cQE\u201d account) by $21 billion.\u00a0 Just as quickly as the stock market dropped, it has sharply recovered more than half of its losses from the previous week. As it turns out, the Fed added $11 billion back to its SOMA account. That\u2019s an $11 billion injection of cash directly into the banking system.\u00a0 Clearly the Fed\u2019s actions were a large factor in the 10% plunge and the subsequent bounce.<\/p>\n

The Federal Reserve is targeting stock prices with it\u2019s monetary policy because, if it did not, the financial system would collapse led by collapsing pension funds and the housing market.\u00a0 The pension collapse alone would run into the trillions of dollars.<\/p>\n

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I have a good friend\/colleague who works at big public pension fund. He did a \u201cstress test\u201d study with the data available to him on all big public pensions. He concluded that, based on the current stated amount of underfunding at every big pension fund, if the Dow\/SPX declined 10% or more over a sustained period of time \u2013 where \u201csustained period\u201d is defined as 3-4 month \u2013 every public pension fund in the country would collapse.<\/p>\n

You\u2019ll note in the graphic above that the three 10% drops in the Dow since August 2015 were followed with sharp, \u201cV\u201d recoveries. Each one encompassed 10% drawdowns which were remarkably brief. The latest 10% plunge has been met with an equally forceful recovery, with the 10% decline allowed to persist for less than three trading days.<\/p>\n

Craig Hemke \u2013 aka \u201cTurd Ferguson\u201d \u2013 invited me to discuss the the massive financial pressures building in the U.S. financial and economic system. It\u2019s 2007 before the de facto financial system collapse on steroids. The factors discussed explain why the Fed will not let the stock market sustain a meaningful sell-off \u2013 visit TF Metals<\/strong> <\/a>for the podcast link.<\/p>\n

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The Fed Targets Stock Prices \u2013 Here\u2019s Why The week before the Dow\/SPX quickly plunged 10%, the Fed had reduced its SOMA account (the SOMA account is its \u201cQE\u201d account) by $21 billion.\u00a0 Just as quickly as the stock market dropped, it has sharply recovered more than half of its losses from the previous week. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[8633,1849,374,2340,6895,503,647,18677,6585,7553,17965,6896],"class_list":["post-31200","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed-intervention","tag-financial-markets","tag-gold","tag-housing-market","tag-investment-research-dynamics","tag-market-manipulation","tag-precious-metals","tag-soma-account","tag-stock-bubble","tag-stock-crash","tag-turd-ferguson","tag-u-s-economy"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31200"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31200\/revisions"}],"predecessor-version":[{"id":31201,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31200\/revisions\/31201"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}