Biderman – Fed Printing $4 Billion per Day Boosting Stocks

In the two short video segments below Trim Tabs founder Charles Biderman hones in on why the stock markets have been levitating to new five year highs.  He says that the Fed’s repurchase of $4 billion per day of bonds works its way down the investment food chain and into stocks, allowing the Obama administration to continue to spend tons more money than otherwise would exist.  So long as Dr. Bernanke is willing to do that and until the bond market chokes on or becomes resistant to additional money creation, Biderman says it is too soon to short stocks.

This marks a change in Chuck Biderman’s former insistence that a market swoon is inevitable, if not imminent.  Biderman now realizes his ‘mistake.’  

Fed money printing in unprecedented, virtually unlimited proportions and for an unheard of duration is boosting stocks and driving down bond yields irrationally pure and simple, forcing money managers of all stripes into stocks in order to chase gains and feeble low yields. 

The rising stock markets boost the ‘wealth effect,’ duping smaller investors into believing the action of the Big Markets  suggests the smart money knows the fearful financial crisis is over and, since the S&P 500 is the ‘best barometer of market health in the world,’ something good ‘must be’ coming.  (We are reminded of the doomed party scene on the roof of a N.Y. skyscraper just under the gargantuan alien mother ship in the movie Independence Day – just before it lets loose with a death ray.  The link above goes to that scene on YouTube as a reminder, but we digress.)

“Talk about leverage?  This is the ultimate leverage,” the money flow and liquidity guru says. But Biderman warns again, “At some point gravity wins out.”

Biderman plans to not increase his stock market shorts until the artificial Fed helium (money printing) is either exhausted by the Fed or repudiated by the bond and other market participants (or more likely first by our foreign trading partners, uh, we mean competitors).  For now they seem oblivious to any ill consequences of currency debasement, apparently preferring not to fight a Federal Reserve with a, so far, unlimited checkbook (or in the case of other countries, focused on trying to debase their own currencies at the same time). 

“Rigged markets never end well,” the Peoples Republic of California-stan market sage admonished, “but staying solvent until the market does crack is essential to financial survival.”   Thus, Biderman, who would prefer to be solidly net short stocks in general, says it is too soon to short Helicopter Ben’s, Mario ‘whatever it takes’ Draghi’s and soon to be Shinzo ‘deflation exorcist’ Abe’s artificial, manufactured, uber liquidity goosed financial good times, uh, we mean ***illusion*** of growth and prosperity.

Ever heard the old saying, “don’t fight the Fed?”  It is time to start believing it even for those who see behind the curtain, apparently.  We are reminded of Eclectica Capital’s genius ramrod Hugh Hendry’s comment to the effect of:  “My curse is to see things coming too early most of the time and then being profoundly paranoid about it.” 

No wonder non-G7 central banks, China, royalty in the Middle East and very recently even Big Wealth in Japan are now some of the largest buyers of physical gold. 

China forbids the export of the yellow metal now, making China a one-way market – in is good, out is verboten.  There is a very, very good reason China, with its three trillion greenbacks worth of built up fiat currency firepower has become the first “Gold Hotel California” or “Gold Roach Motel” of the 21st century.  The command and control there is thinking a bit longer term and methodically wants to convert as much of the west’s debt based fiat paper promises into hard assets as possible – before the time comes to do so urgently. 

  
Even the best of the market riggers know there are major consequences to competitive devaluation of fiat currencies coming sooner or later, apparently. 

 
Biderman’s comments begin below in two video segments.   

(Edit Saturday to add a Bonus 3rd segment which we deem essential viewing in context with the first two segments. )  Our thanks to Chuck Biderman, as our friend Rick Santelli calls him, for his work in liquidity theory. 

Segment 1  Too Early to Turn Bearish…

Segment 2 Fed Creating $4 Billion per Day…

Source:  Trim Tabs via YouTube
Segment 1
http://www.youtube.com/watch?list=UU_FouojmbzN_jwBVkroDQBw&v=EYDOmoJTn3U&feature=player_detailpage

Segment 2
http://www.youtube.com/watch?list=UU_FouojmbzN_jwBVkroDQBw&v=KOfXkt8Kezc&feature=player_detailpage 

Bonus segment.  “The true arrogance of the Obama administration is that it believes that the world will always treat the U.S. dollar as being as good as gold. … However if the U.S. government stays as arrogant as it is, at some point soon the Black Swan will fly and the rest of the world will get smart and dump the dollar.” – Charles Biderman, January 2013. 

Bonus segment direct link:  
http://www.youtube.com/watch?v=T_EeIvAgyxk&list=UU_FouojmbzN_jwBVkroDQBw&feature=player_detailpage

Recently we commented on the current action of the Big Markets in nominal terms and how that nominal performance looks when taking into account dollar debasement – by showing the Dow Jones Industrials in terms of gold. 

Below is one of the charts we showed then.  The DOW essentially priced in U.S. dollar gold.  In nominal terms the DOW is indeed testing new five year highs, but in terms of gold metal, which is discounting the extreme money printing by the world’s central banks (which they say is necessary to save the global financial system) – the DOW Jones Industrials looks like this:

We are reminded of Hayman Capital’s Kyle Bass’ comment at the recent Tiger 21 conference.  “One of the best performing equity markets in the last decade has been Zimbabwe, but your entire equity portfolio now buys you three eggs?” Bass asked rhetorically.  “You have to really focus on the insidious nature of what inflation is and how real returns might be negative in equities and bonds – and you’re losing purchasing power,” he continued.

Bass agrees with Biderman in one respect.  He says that as long as the Fed keeps printing as much money as the profligate U.S. Congress is overspending, stocks ought to keep moving higher. 

2013-02-02 21:35:16

Source: http://www.gotgoldreport.com/2013/02/biderman-fed-printing-4-billion-per-day-boosting-stocks.html