Randall Forsyth

Randall Forsyth at Barron’s Magazine says it had little to do with those ‘financial weapons of mass destruction’ (exchange traded funds and notes), derivative securities, created to bet against volatility (VIX). In his opinion it is all about monetary policy.

“We are witnessing the beginning of the end of the radical monetary policies that brought interest rates down to zero—and in some cases, below zero—and flooded the global financial system with excess liquidity. That has resulted in the inflation of asset values and the subduing of market volatility. That, in turn, enriched investors and speculators. Until it didn’t.”

There is but one problem with this revelation

It’s Wrong!

It is not new news, nor is it particularly a revelation. Pundits like Forsyth have actually been making this case for the past five years, since before the beginning of the tapering of Quantitative Easing (QE) by the Fed in in December of 2013. The actual purchases were halted in October of 2014. In December of 2015 the first quarter point increase off the 0-.25% low in the Fed Funds rate was implemented. Subsequently the rate was increased to 1.50%. At every step in this process we were warned that this time it was the beginning of the end (Kort Session #18, “Fed Bolt from Hell, Part II –March 23,2017). During this four-year stretch of end-of-the-world monetary events the S&P 500 managed to run from 1845 to a new all-time-high of 2872 … not bad for the ‘end times’.

Media/Pundit Malpractice Never Ends–Birinyi gets’ it right

I’ve been writing about this for the past five years, but in the above link to Session #18, dated March of 2013, I put up a link to a Barron’s article by Laszlo Birinyi, money manager and founder of Birinyi Associates. Kort Session #18, “Fed Bolt from Hell, Part II –March 23,2017 published in 2013 the piece takes a look back to 1994 (S&P 500-465) and 1996 (S&P 500-669), all similar issues to those facing us today … potentially higher interest rates and a fairly constant negative spin coming out of the media and punditry. As most usually is the case these episodes ended badly for them (the media and pundits) and anyone who paid attention to them (S&P 500 – 1550 by March of 2000). I might point out that in Birinyi’s pre-investment career he was that of a history major at the University of North Carolina, and knowing history for him and all of us is a real leg up in the stock market. Knowing this history might have kept you in the market four years ago.