Thursday, August 11, 2011
8/11/2011 - The Federal Reserve Saves The Stock Market?
The Federal Reserve has saved the stock market! Well, at least for a day. That was one heck of a "dead cat bounce" that we saw on Tuesday. Normally, after the kind of dramatic decline that we saw on Monday there is some sort of a rebound, but on Tuesday the market did not begin to soar until the Federal Reserve pledged to leave interest rates near zero until mid-2013. Once the Fed made their announcement, the market went haywire. At one point the Dow was down more than 200 points, but by the end of the day it was up 430 points. It was a desperate move for the Federal Reserve to pledge not to raise interest rates for the next two years, and it has stabilized financial markets for the moment. But what is the Fed going to do to save the stock market when it starts crashing next week or next month? The underlying financial fundamentals continue to get worse and worse. Europe is a mess, Japan is a mess and the United States is a mess. The Federal Reserve can try to keep all of the balls in the air for as long as possible, but at some point the juggling act is going to end and the house of cards is going to come crashing down. (Read More....)