Bullard

 I'm watching the Yellen Congressional testimony (as much as they have provided) and heard none other than market mover, the F_E_D's Bullard will be on CNBC for 2 hours tomorrow morning. As you know, when the market in the past has been either set up at a stage 1 bottom like the October lows or a stage 3 top like the September highs, Bullard has been the catalyst to moving the markets which is one of the pieces of evidence I had discussed in my article, The Plunge Protection and Market Correction Team. Note that my article is not only along the lines of the notorious President's Working Group on Financial Markets, created by Reagan by executive order and the Plunge Protection everyone has been so keen to accuse them of and probably rightly so, but add "Market Correction" as that's what the evidence seems to show.

You might say there's a time to reap and a time to sow, otherwise known as the business cycle or the transfer of wealth. I was discussing this with another member. In 2006, the F_E_D lifted rates from 1% in 2003 to 5.25% in June of 2006. One of the things that held up the 2002/2003-2007 bull market was Consumer Spending which was made possible by equity in people's homes taken out via HELOC's and 2nd mortgages, etc. In my own personal experience, I had bought a home in 2003 after seeing prices in our area jump by 30% in two weeks, knowing this was a bubble in housing, but it was a bubble that was likely still a ways off from popping so we rushed out to buy a house after looking every weekend for 8 months and after 5 contracts that we backed out of after inspection for various reasons like termites, we ended up with something far from what we wanted at $205,000, which was only on the market 1 day.

A year or so earlier, that same money would have bought a home on a deep water canal with a boat dock, which were now $500k just for a lot. By 2005 or so, our home was appraised at more than double our purchase price, over $450k. My point in my discussion with one of our members yesterday who was of the opinion that the F_E_D can't let the market fall was that this is part of the wealth transfer mechanism, i.e. "A time to reap, a time to sow".

I don't know how many people you may have known who had homes valued at more than double what they paid for them, but suddenly when the music stopped (for home builders that was around 2005, for home prices that depended on the area, but generally before the 2007 market top although different pockets around the country diverged. I know very few people today who are better off for having bought a home and for a while, having tons of cash in their pockets, most have lost them or can't nearly afford what they are paying for them now and at some point will likely lose them. WEALTH IS NOT DESTROYED, IT IS REDISTRIBUTED.

I'm not going to go any further with opinion on this matter, but I think it's a fairly well known fact that there's a growing disparity between those with and those without. It seems to me that since the more active central bank policies, these cycles are more predictable and more pronounced, take the 2000 tech bubble, the 2007/2008 sub-prime financial crisis... 

The point simply being, I don't doubt the invisible hand of the Central banks in the market, in fact in 2009 myself and David DT who many of you know were actively posting when the PPT would be active right down to 10 minute accuracy. What I doubt is the narrow view that wealth creation is a one way street in which markets can do nothing but go up. How is money transferred from the layman or in today's vernacular, the "Buy the dip" crowd, amateurs in investing that have never seen a rate hike (in fact it is estimated that 1/3rd of professionals have never seen a rate hike) I have seen quite a few, to , well the wealthy? 

Food for thought, I'll obviously be very interested in what Bullard has to say tomorrow as the timing giving market circumstances is quite interesting.