It's Federal Open Market Committee time again. And, even before the June 24 meeting adjourned, word-parsers were dissecting the "minutes" like a high school biology student with a frog.
In short: While everyone with a pulse guesses at the meaning of Bernanke-speak, ALL of them hope his words give the stock market something to celebrate. According to the mainstream experts, that "something" would be ongoing signs of an "easy" money Fed. On this, the following June 24 news item explains:
"Stocks Up Ahead of FOMC... The Fed is widely expected to leave its key rate unchanged. Many investors are nervous that a recovery could be hampered if the Fed raises rates too soon." (AP)
Here's the thing: All this time and energy spent on what the central bankers do or won't do, say or don't say -- is a complete waste. The Fed never has/never will possess the power to LEAD a recovery in stocks and the economy. At best, monetary policy follows the larger trend already in force.
Think about it: In the past two years, the Fed has embarked on an "AIDZILLA"-like crusade to rescue the fledgling U.S. banking sector. This has included $12.8 Trillion in bailouts since September 2007, and TEN interest rate cuts to a record low of .25 to .0%. Combined, it's the single largest inflation-creating scheme in U.S. history.
YET -- the U.S. stock market still remains more than 35% BELOW its October 2007 high, yields on long-term Treasuries have soared along with mortgage rates, and the giant grizzly continues to rage across every major sector from housing to automakers, and jobs to retail.
This is NOT an isolated incident. At the very onset of the Fed's most recent Operation Rate-Slash, the September 2007 Elliott Wave Financial Forecast presented the following close-up of the "Unwonderful Wizardry of the Fed" and warned:
"Any near-term positive response to a Federal Reserve rate cut will be short-lived… The Fed's power to hold up the economy and stocks has no basis in physical reality."
(NOTE from chart: A Federal Reserve rate cut from 6.5% -- To -- 1.25% from 2000 to 2002 proved impotent against the longest stock market decline since the Great Depression, the tech-bubble bursting, and a brief economic recession.)
Since the publication of the September Elliott Wave Financial Forecast, the violent downdraft of the U.S. financial crisis plunged the U.S. stock market into bear market territory and triggered the worst credit collapse since the Great Depression.
Now that a slight break in the clouds has occurred -- i.e. slow uptick in home sales, rise in many commodity prices, and rebound in consumer confidence -- the mainstream is paying tribute to the Fed once more.
Don't fall for it.