Tuesday, February 16, 2016

Masses struggle while Fed Pays Banks 7 billion to do nothing

The Fed paid banks $7 billion last year to do nothing with their money. Why is the Fed doing this? It keeps the velocity of money at a low level. What is the velocity of money? It is the speed at which money changes hands. When the economy is healthy the velocity of money increases and vice versa.  

However, Central bankers have been able to inject massive sums of money into the system, and the inflationary effects have been greatly minimized because the banks have not lent this money out to the masses.   In fact, we have a deflationary situation, and that is why the precious metals sector collapsed, and prices are likely to remain off their highs for some time come. It is hard for Gold and other commodities to rally when inflation as the BLS measures and defines it is non-existent.

We disagree with their fraudulent system which really does not take core factors into consideration, but that is a topic for another day. What matter is that the Masses accept this data without mounting a contest, so as far as the markets are concerned, inflation is well under control.  The negative interest wars that Central bankers have gladly embraced will add further pressure on commodities. Imagine having to pay banks interest to keep your money with them. Well, this is what is happening in Japan and Sweden.

Central bankers are raising the stakes; their ambition is to force everyone to speculate by making it expensive to keep the cash.  This can be construed as another form of QE as the markets will eventually be flooded with a lot of extra cash.  Lastly, we think the Fed will eventually allow banks to lend this money out, which will then serve as the bedrock to create a monster bubble the likes of which we have not seen. We can expect the market to soar to levels that one can only dream off today.

Gameplan

You strong pullbacks in the market to build up a list of companies that are growing strongly; you can use a good stock screener to help you achieve this objective. To give you a small head start, here are some companies you can look into, COST, RTN, TAST, CALM, FIZZ, HRL, etc

Mass psychology states that trend is your friend everything else is your foe. 

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