Pundits of every stripe thought the Federal Reserve was out of ammunition to keep the economy afloat while the world battles the coronavirus.
However, over this past weekend the Fed pulled out all the stops.
All that's left to throw at the economy is the kitchen sink.
Wall Street liked what it saw.
At first.
Stocks bounced up on the news before sinking into the red by yesterday's close.
But there's an even bigger problem...
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The Fed's been taking some desperate measures lately in these desperate times.
But markets haven't fully priced in their rescue and recovery programs for what they really are, which is an admission that "this time is different" and it's too late to stop what's going to happen next.
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If you think the Fed's going to fire hundreds of billions or trillions of dollars of "stimulus" rounds at the coronavirus crisis and pierce its grip on mankind, on the market, and on the economy, you're wrong.
This is an existential threat to humans, markets, and economies, which the Fed's ammo can't kill – but it sure can make it worse.
Here's what the Fed's doing, what it's going to do, why it won't work, how you'll know it's not working, and how it's going to make everything worse…
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Central banks to the rescue?
Good luck with that.
The U.S. Federal Reserve tried to swoop in and save the market panic with a 50-basis-point cut on Tuesday. But lowering rates, even a "concerted" lowering of rates by several central banks working together, in the face of already low rates, isn't going to be economically stimulative.
Central banks lowering rates now is like opening the barn door after the horses have already bolted.
Lower rates aren't going to get consumers out if they're scared to go out – or if they can't go out. They aren't going to induce capital spending by companies if companies don't know where demand will come from or when it will come back.
Besides, the flight-to-quality trading that's driven hundreds of billions of dollars into U.S. Treasuries, for example, has already lowered rates dramatically.
When the coast is clear and the coronavirus is behind us, central banks will have to start pulling back the stimulus they intend to flood economies with. Markets know that's the other side of lowering rates in an eventually passing crisis.
So no, lowering rates isn't going to put a hard and fast support under weak markets.
Markets are looking at economies and sales and revenue and earnings and profits… and now losses. Those economic realities are reflected in stock prices.
We're not out of the woods yet. But this will tell us when we are… Full Story
We're not out of the woods yet. But this will tell us when we are... Full Story
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We've seen this show before.
After the stock market hits a rough patch, almost on cue, riding a noble white stallion, comes the Federal Reserve to save the day with an interest rate cut.
But this rate cut was exactly the wrong move.
Here's why, and what you should be watching for instead...
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On Wednesday, the Federal Reserve held interest rates at a range of 1.5% to 1.75%.
Rates have remained low for more than a decade.
And they are likely to go lower, not higher, in the months ahead.
If you're mainly looking for fixed income from your investments, it's clear the Federal Reserve wants to limit your options.
But they can't lower the yields on our top dividend-paying stocks this week.
In fact, our top pick today just raised its dividend 25%.
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Anyone living on a fixed income can attest to the Fed's punishment over the last decade.
With the 10-year U.S. Treasury bond sitting at a paltry 1.7%, we're facing a yield crisis as central banks around the globe continue to pump more stimulus into the markets.
The solution for investors looking for yield is to tap into the best dividend stocks.
Those are the ones with a steady track record of hiking payments to their investors.
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Rumors of the Federal Reserve's demise – in part because it was "duped" by the biggest bank in the United States – have been greatly exaggerated, though headlines would have us believe otherwise.
MarketWatch declared in April, "The Federal Reserve Has Lost Control of the Financial Markets."
The Wall Street Journal asked in June, "Has the Fed Lost Its Mojo?"
Not only has there been no letup, but fearmongering headlines are being ratcheted up.
Just last week, on Dec. 18, The Economist, with a graphic of a fire extinguisher in the shape of a dollar sign poised over rising flames, cautioned, "Despite the Fed's Efforts, the Repo Market Risks More Turbulence."
Repos (repurchase agreements) are short-term borrowing facilities traded in the fed funds market, where banks and other systemically important financial players borrow from each other. It is frightening that they blew up in September – right under the Fed's nose.
It's even more frightening that the turn of the year could put exponentially more pressure on repo rates, and spiking rates could force selling – with continued selling as margin calls force asset prices lower and lower.
Once again, it looks like we're looking over the edge of an abyss at potentially huge market losses.
But the truth is, the Fed hasn't lost anything. At least not yet.
Maybe the Fed was duped by the biggest bank in the United States into restarting quantitative easing. Or maybe it saw what was happening and let it happen to scare the hell out of banks and overleveraged hedge funds.
No one knows the truth there. The Fed's never going to tell.
But the "Fed's lost control" narrative is fake news. Sure, one hand came off the tiller, but it still has control of the ship. At least for now.
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The Jumpstart Our Business Startups (JOBS) Act of 2012 made it so that anyone can be a startup investor today.
But how does startup investing work?
In the past several decades, startups have produced revolutions in U.S. business, from personal computers to hotels to public transport.
And they've made their investors very wealthy.
While angel investing used to be the domain of institutional investors and the super-wealthy, this is no longer the case.
Anyone can jump in and start learning to become a startup investor with as little as $50...
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Turn on any television, click on any hyperlink, and you'll be bombarded with… "versus." It's tiring: bulls versus bears, expansion versus recession, and of course, red versus blue.
Well, we can put these polarizing debates to bed, once and for all… The old rules of economics and approaches to investing – the tired old sacred cows of the pundit class – are rapidly receding in the rearview mirror. And investors who align themselves with that kind of thinking are, to be blunt, doomed.
Even now, we're way past talk of "bulls and bears." I'll show you in a minute how the Fed and its renewed money-printing – $278 billion and counting fast – are pushing us toward what old sailors and cartographers used to call "terra incognita."
The edge of the map. The Twilight Zone. Think "Australia in 1603." Unknown land. "Here be dragons." Strange territory, indeed.
And just like those early modern explorers found, there are almost unimaginable riches to be had. There's peril, too, but I'll show you why you don't have to worry about that.
The Fed's unprecedented – let's call it what it is, folks – stimulus has created a gravity-defying, absolutely gangbusters market melt-up: a colossal opportunity for making money. One that we may not see again in our lifetimes.
If that sounds strange to you, I agree. The fundamentals don't support a market like this, but the Fed is the market now, and this market is having a melt-up for the history books.
And I don't want you to miss a red cent of the profit potential… Full Story
And Matt doesn’t want you to miss this insane profit potential…
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