Looks like the DJIA closed down 115 to 16,544
SP500 down 22 to 1906
NASDAQ down 102 to 4,276
It's a beautiful mess. I think NASDAQ got hit the hardest.
I now claim unqualified victory, but I, like coach d, am still waiting for better prices.
The question is, what happens now? The fed is concerned about inflation, or lack thereof, which affects their setting of the fed rate. What are they going to do now, artificially create inflation? Another round of QE to buy bonds at inflated prices? How about a round of QE to buy equities at current (inflated) prices?
Unemployment is SO bad that even the gov't couldn't fudge the numbers enough to make it look any good. So what can they do? Artificially drive up prices, that is what.
If that happens, there will almost certainly be a bump up in prices, but it won't last, and the key will be in predicting the timing roughly correctly.
Here's something to think about: the fed uses PCEPI, which is not equivalent to the BURDEN represented to consumers of purchasing those things, using true disposable income, after all tax and regulatory effects have been considered, not just "income tax". It does include a category for health care, which I believe includes insurance (unlike CPI), but the weighting has been adjusted accordingly to minimize and even reduce the effect of rising costs--the category is 6.2% in the CPI, and only 5% in the PCEPI--less than clothing, and much less than recreation. Yeah, right.
So sure, gas prices, and some other prices, are going down...but the burden on the average consumer is not, it is going up. While taxes and fees rise, the median household income in the US "hasn't shown a statistically significant increase since 2009, and is 8% lower than in 2007" (http://fivethirtyeight.com/datalab/five-years-of-recovery-havent-boosted-the-median-household-income/)
So prices of many things probably aren't going to get a boost due to increased private demand, except for some niches like eldercare--and even that won't then rise as expected. Business inventories are already generally high, from what I read.
Enter the government, to create demand and raise prices thereby. The ROW won't do it, and really cheap stuff you can get in the ROW tends to be supplied locally by entities that are not completely represented in either data or in the markets.
I think any such move would have an extremely time-limited effect, and certainly no effect lasting beyond the direct purchasing period. What would the fed do then, lower the fed rate to negative, like Denmark? Fudge the unemployment/growth figures further?
Lots of things to consider, one of which will be how housing prices respond to the equities & bond markets. HELOC's will extend consumer activity for a while, along with other types of credit. It is looking to me more and more like support of house prices will become a major target of the fed, so I will look for buying to take place in that sector.
Bottom line is, when things are intrinsically overpriced, there is only so much the fed/gov't can do, before prices settle down to their "right" levels. Yes, I believe there can be an "intrinsic" price level, at least for those of us who have the ability and desire to work our own resources, rather than letting others work them for us, while taking a cut.
So while they fiddle with unemployment/growth/interest rates, they aren't paying enough attention to tax and regulatory burden, and that is why things are heading in the same direction as they have Europe, IMO. Europe is ahead of the curve, they have learned how to adjust to these things, how to live with them--mostly by complaining, and by investing in the USA, and by hiding money, I must say. The thing is, there isn't really anywhere better for capital to move to, from the US, so an internal revolution will be what will be needed. This is why the fall elections, and the upcoming presidential election, will be so important. Tax and regulatory policy going forward will be critical to the future shape of the markets and the economy.
Any options guys out there laughing today?