The Fed will not save the market this time
The fractals, the repeating structures. The symmetry in time or space. History and the conclusions we draw from it. Mathematics in the price trend. The ignorance towards the history, the price evolution and the experiences of the generations that slowly only belong to our memories. Today’s ignorance of mathematics and its role in the pricing of what we buy every day. The history of the stock market. The prices, their laborious observation, which began in Japan 300 years ago and led to the introduction of derivatives, still foreign to most Europeans. The situation on the stock exchanges, which, as they say, reflects the nearest future in a flash (mainly thanks to the modern algorithms and computerized HFT trading) and only reacts to the coming(!) events now…
Consider the history of the last years and the current situation.
The Fed has been playing into the hands of Wall Street billionaires for years: every time there was a 20% or so drop in stock prices, the helicopter money came in the form of dollars to rescue the assets. This magic 20% of the free fall from all-time highs was supposed to mean the beginning of a bear market for most analysts and economists. If there was turbulence in the stock market, new shiny measures were immediately announced: bonds were bought, interest rates were lowered, money printed out of thin air was pumped into the veins of the banking system. Why such a violent reaction? 55% of the savings of future U.S. retirees are invested in risky assets like stocks, mainly through the 401(k)* program, which is a tax shield for U.S. citizens. That’s why the FED and the U.S. government need to pay close attention to the stock market. Even Alan Greenspan acknowledged that the level of stock indexes determines the level of the economy, not the other way around. If the American retiree gets a statement from his account every month and sees that he has more and more money, he might buy a new car, a cottage in Florida, or at least afford a trip to Vegas. If this is not the case, the demand in the country where consumption is responsible for the 70% of the GDP decreases and the electorate of the party currently in power is lost. Continue reading