(Note: a staff member found this draft, dated 7/17/2014, while browsing through our records. We have no idea why the thing wasn't posted then. It's no longer timely, but as the piece covers a sea change in Fed policy, MacDougal wants you to have his take anyway.)
"Equity
valuations of smaller firms as well as social media and biotechnology firms
appear to be stretched, with ratios of prices to forward earnings remaining
high relative to historical norms."
-Federal Reserve Bank, July 15, 2014
There
are so many things wrong with this observation we don’t know what to make of it
- let alone where to begin. Yet with
this ill-considered blather, the Federal Reserve Bank (Fed) targeted specific
stocks, and moved the market for those issues. Implicit here was a call to sell. Like your broker’s frantic voice,
him getting you on the horn with a hint of panic to the frenzied background
buzz inside his storefront office.
Exactly like your broker calling, and buy-side investors with online
accounts, chilled by the memory of those awful arm-twisting conversations of long ago, could only
conclude one thing: God help us, monetary policy is in the hands of dunderheads. The patients are finally running
the asylum.
Just looking
at the Fed’s drivel as prognostication, the level of stock market inexperience
here boggles the seasoned investor’s mind.
Social media and biotechnology are areas that simply do not lend
themselves to generalization. Overall
prospects are ginormous for biotechnology, and somebody’s going to win big
time, and, looking back 50 years from now, today’s prices for stocks of the
eventual winner(s) may well bear the lowest valuation(s) in the market at this time. On the other hand, a half century from now everyone else in the industry could be gone. Social media is a whole
other thing. Who knows what to make of them? Is this it, or does the next big new thing lie just around the bend? Do they have brand loyalty or what? Again, sky's the limit, only this time it's maybe, maybe not, and on a case by case basis, failure is certainly in the cards too. Basically, we've never been here before with this stuff.
And, possibly most important of all, why would anyone consider those stocks to be representative of investments? Fed is going on about a crapshoot. Why? Why oh why oh why? Could've chosen to cover the Belmont Stakes instead. At least that would've been entertaining to read, owner of the big loser there throwing a hissy fit and all.
Then
there’s the “ratios of prices to forward earnings” thing. Wall Street Crime Families pass that kind of
math off on us as if anyone there can actually calculate “forward”
anything. In reality, a racketeer in the
fortune telling business can't look ahead 10 minutes without falling flat
on his/her face enough of the time to render that approach periodically catastrophic
for the client. Taunting the
uninitiated with math tied to little white lies about the future is used solely to churn
newbie accounts into chasing growth. Elusive amorphous visions of growth, to be more precise.
Buying and selling and buying and selling and more buying and selling,
that’s how the Families create obscene trading profits for themselves, the
bread and butter racket for those criminal enterprises ….. and what we'll politely label "cash outflow" for you.
And
now, by releasing a price sensitive opinion, the Fed
Chairbimbo and them are out there shilling stocks, helping mobsters rip off another generation
of young suckers by tipping them off to hot inflection-point swing trades.
The perception of political corruption has spread by leaps and bounds under this Administration. When will it ever end?
