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$#*! the Fed Says
09/30/2011 11:30 am EST
Our national bankers are saying things that the media can spin as positive, but to Merlin Rothfeld they seem to be all but admitting they’re out of ideas, as he explains in this exclusive interview with MoneyShow.com.
Merlin, I know you do a lot of work on how people perceive information. Can you kind of give me some clues on this summer’s activity, and how information has been received?
That would be like a trilogy. I mean, there are so many movies we could make about all of the information out there.
But I think we could start off with one of the premises I operate on, which is the media does one thing to get everyone to perform an action that’s the opposite of what they should be doing.
So, for example, I think we talked about this before where you had the capture of Osama bin Laden and all of a sudden the market was just spreading this news. It’s going to be a huge rally. Market gapped up…and it has never looked back. It has just been selling off ever since.
So recently, we’ve had a lot of interesting headlines, certainly with Ben Bernanke and all of his comments about policy. A lot of people perceive the Fed’s comments to be bearish in the sense they said economic growth isn’t going to go anywhere, things are going to get worse going forward, and we’re going to keep interest rates at less than 0.25%.
A lot of people perceived that as negative initially, but then were like "Oh, wow, they’re going to keep these rates really low," which means that should keep the economy stimulated and growing to the upside. That’s the basic perception that I see happening out there.
What I think really happened is you had—and this is going to come across as pretty mean—basically the Fed throw up their arms and said, "You know what? We’ve kind of done all we can. We’ve got no more bullets in our gun. We know things are going to get worse, so all we can do is keep things the same because that’s all we have left and now we’re going to leave it up to our politicians," which for you and I should be the most frightening prospect ever.
So, just based on that little piece of information, it comes as no shock to me in any way, shape, or form that our markets not only selling off but should continue to sell off, because can our politicians agree on anything?
The inmates are running the asylum.
It’s absolutely chaotic. So, everyday there’s news put out there, whether it’s a GDP report, earnings, unemployment, statements by the Fed or statements by our President and politicians that are designed to make people feel warm and fuzzy.
I mean, very rarely do you get Bernanke or the fed coming out and saying “Oh my goodness, the sky is falling, buy a bomb shelter and run,” but they pretty much said our economy is not going to be doing very good, unemployment is going to be going up, and…
…and we don’t know what else to do.
We don’t know what else. Really, to me the statement seemed like frustration, and most people I guess look at information differently.
I think that’s why trading works, because one person perceives this and says, "Here’s how I’m going to act on it," and another says "I’m going the opposite direction," and we have a trade.
Through education—and kind of my area of expertise is teaching people how this works—you can break down all of these perceived notions of how things are supposed to work.
I have a finance background. I have a finance degree and I was taught all of these amazing things. I have textbooks that just say here is how it works, and you get in the real world and you get in the real market and you go “but the book says” and it’s not true.
Historically, gold should go up and markets should go down. Now all of a sudden, there is no correlation really. It is just kind of all random.
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