Monday, February 07, 2011 12:45 PM

Fed Succeeds in Fostering Massive Speculation in Junk Bonds and Equities

Video at the link Below

Another day, another market high. The longer this goes on, the bigger the next crash. In the meantime the Fed is openly bragging about its efforts even though Bernanke Warns of "Rapid and Painful Response to a Looming Fiscal Crisis". http://globaleconomicanalysis.blogspot. ... inful.html

Bloomberg reports Fed Spends 40% on Benchmarks as Newest Prove Cheapest http://noir.bloomberg.com/apps/news?pid ... 7IbLBbD8jc

The Federal Reserve’s Treasury purchases already have succeeded in driving investors to junk bonds and stocks. Now, policy makers are focusing on benchmark government securities, helping contain rising yields that set rates on everything from corporate debt to mortgages.
It pains me to see such inaccurately worded statements. No one can be pushed into stocks, in aggregate. Except for new stock issuance, dept offerings, IPOs etc., for every buyer there is a seller, and at the end of the day sideline cash is the same.

Moreover, this has been a futures-driven rally. Volume of actual shares trading hands has been low. However, the Fed has, for the time being, succeeded in reigniting a massive Greater Fool's Game in terms of what speculators at the margin are willing to pay for financial assets.

Bloomberg Continues:

More than 40 percent of the government bonds the Fed bought in January for its so-called quantitative easing were auctioned in the previous 90 days, up from 20 percent in December and 15 percent in November, according to Bank of America Merrill Lynch. The central bank is concentrating on newer securities as its $600 billion program depletes primary dealers’ holdings of Treasuries to the lowest since November 2009.

“They’re getting all the bang for their buck that they canâ€