Mario Draghi will be next to speak at the Jackson Hole gathering, but if his prepared speech is as useless and uninformative as Yellen’s, the group’s time would be better spent trying to snow ski, at their winter wonderland. The market was ready to respond to every word uttered by the Fed Chairwoman, but nothing of a monetary policy nature was forthcoming. Nothing was mentioned about inflation, interest rates, or reducing the balance sheet. Instead, she stuck to a theme of financial stability giving credit to reforms put in place following the 2008 financial crisis that she said strengthened the financial system, without impeding economic growth. In fact, results have been positive, but far short of projected targets on most accounts.
Due to Yellen’s doveish report, investors continue running into the (burning building) stock market. Any mention of interest rates, inflation, or Fed intentions of trimming their $4.5 trillion balance sheet would have slowed the market rush, but none was forthcoming. Instead, Yellen said there is “reason to hope” that the U.S. will experience fewer financial crises and will recover more quickly should they occur. Then she said, “Banks are safer. The risk of runs owing to maturity transformation is reduced. Efforts to enhance the resolvability of systemic firms have promoted market discipline and reduced the problem of too-big-to-fail. And a system is in place to more effectively monitor and address risks that arise outside the regulatory perimeter.”
The last person to look into a camera, like Yellen did today, and emphatically state a bold-faced lie, was President Clinton when he said, “I did not have sexual relations with that woman.” The fact of the matter is that due to the newly improved “bail-in,” banks have been emboldened and empowered to logarithmic levels of stupidity. The bank use of derivatives today is more than ten times greater than what was in place and contributed to the 2008 financial crisis. 50% of every derivative acquired loses. If your bank comes out on the losing end, the money you have in that bank is no longer yours, it’s their’s and your just a bank creditor. Ask depositors at Banco Popular if you have any doubts, because that same verbiage is in your bank agreement too.
Physical precious metals are the greatest financial insurance policy that you can own at this time. Investors should not let ample availability and manipulated lower prices fool them into believing anything else. This is a golden opportunity (pardon the pun)! Today’s nanosecond trading technology can change conditions dramatically and immediately. Don’t get caught without a chair when the music stops!