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Mailbag: Risk Continues to Build

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It is all just getting riskier...

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Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this exchange with hopes that it adds balance to your process.


Prof. Succo -

I'm sorry to bother you with such a minor observation, but...the Fed comes in at 10:30 and does a coupon pass... the Treasury market shrugs and the stock market catches fire? What's wrong here?

Considering the massive amounts of liquidity already in the system (and a dubious need for a coupon pass), is it safe to assume that the Fed is targeting asset prices (as Greenspan alluded to in WY)? In other words, is the Fed intentionally trying to encourage the post-Katrina stock market rally to keep going?

I have no words for the manipulation of the inflation numbers! How about the 4.9 pct unemployment rate? How much longer will the market suspend disbelief (as Fleck likes to say)? Truly the emperor has no clothes (funny how the ancient fables still hold true, isn't it?)

Best regards,

Minyan Jeff Diamond

MJ -

I honestly believe this. Over time, the equity markets have been "trained" to respond to liquidity while bond markets have been trained not to. This has been done through the manipulation of inflation numbers.

I agree on all and if I talk more about it people will think I am shrill. I am on record. Greg Weldon did a good job in tearing apart the fallacious employment numbers.

The Fed is absolutely targeting asset prices; I wrote a quick buzz on that where income has been replaced with capital gains, a very dangerous scenario.

It is all just getting riskier.

-Prof. Succo

No positions in stocks mentioned.

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