The following three charts are courtesy of David Rosenberg. Here is what they are telling us:
The Fed, using the mechanism of QE, is purchasing hundreds of billions of dollars of shoddy assets from the TBTF banks.
They are purchasing hundreds of billions of dollars of US Treasuries in order to keep interest rates at artificially low rates.
Their balance sheet is expanding rapidly.
The banks are funneling the Fed money into the stock market, either directly or via their large hedge fund clients.
The stock market is rising in concern with the Fed’s balance sheet.
But the newly created Fed money is NOT finding its way onto Main Street. It is not helping the economy or the workers.
I know it’s hard to believe, but 90 million Americans are out of work – that’s one in three eligible workers unable to find a quality job.
If you believe the MSM hype that the economy is strong, the job market is strong and the stock market’s record-setting rise is due to the economy you are in for a surprise. These charts speak to a different reality.
As long as the Fed continues with QE, and they will, because if they stop, everything collapses (stock market, bonds, economy) and the incumbents in Washington DC will be out on their rears. If they continue purchasing the banks toxic assets, more money will flow into the stock market, regardless of the economy. Interest rates are too low to attract the hedge fund capital and Europe and Japan are in worse shape than we are; which isn’t saying much for us.
And do not fear, the dollar will decline and gold and silver will not only recover, they will soar to new record highs. I believe this to be true with every fiber in my being. Everything I have learned over the last three decades convinces me that this is the only possible outcome. I can’t tell you exactly where the bottom for the metals is, but if we are not there already, we are close. My gut tells me that the turnabout will happen no later than early fall – maybe sooner.
Be patient. Things are about to reverse and gold & silver will make the headlines but not because they will be falling – because they will be soaring.