It’s getting downright ugly out there as stocks are now collapsing 5% this session and are now off 17% in less than a month. The most interesting aspect of this whole collapse is that we’ve already wiped out all of the gains since QE2 officially started and we’re fast approaching the Jackson Hole levels when the program was first announced.
Apparently, Brian Sacks’ plan for keeping assets “higher than they otherwise would be” isn’t panning out so well. The wealth effect has turned out to be nothing more than confidence fairy economics. And now the scariest part is that, due to persistently misguided policies, the Federal Reserve appears to have completely destroyed their credibility with regards to future policy.
Figure 1 – Wealth Effect
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.