- In Trade Chatter
- Last Updated: 17 December 2012
- By LA Little
This has to go down as one of the strongest years of optimism and intervention. They two are definitely intertwined with the latter driving the former - reluctantly. Ask anyone who is bullish on this market and they will tell you they are uncomfortable. Ask anyone bearish and they will tell you they are more than uncomfortable. It's been painful for them to say the least. With the elections in Japan we get our latest salvo in the year of interventionism. The ECB adopted that policy strongly about this time last year and expanded in again this summer. The Fed and BOE have been hell bent on this policy for a much longer time. Japan were the first to adopt the ideas and have now decided that simply didn't do enough of it. Overwhelming force seems to be the buzzword in the halls of central bankers now.
So where will it and end and how will it unwind. There is universal distaste for it popularize by Ron Paul and the great minds following the Austrian School of Economics but so far it's all smoke and mirrors with no cracks. Sure it hasn't set the worlds growth rates on fire but one could argue it has kept the world out of a greater depression but if Japan is any example one really does have to wonder where it ends and if in the end if we will be any better off.
Take a look at the bond market as an example. Do you really believe that bonds are a safe bet here. They are so mis-priced that one cannot tell what the real risk is and it isn't just bonds. It's everything. A free and unfettered market will give you a measure of real risk but when the Fed creates artificial demands and supplies on the scale that they are doing one cannot really accept the rate of risk being telegraphed as been real. It's just real while the intervention lasts.
So, as we wind dow the year and try to forget the day-to-day action in the markets for a while, we can ponder the larger thoughts of where does it all end and will we be any better off as a result of what we have done? I wish I could answer in the affirmative on that latter question but I can't. That's not to say that I know it will end badly because I don't. All I know is that if I compare what is happening on a national scale with what I do on a micro scale, I just don't see how it ends good but then maybe that's not the right comparison. Something to ponder ...