Boxed In!

What a surprise, the Federal Reserve this week left interest rates alone.  Readers of this blog would have expected nothing else but what is now interesting is that this move shows how the Federal Reserve is completely boxed in.

The market got what it desperately needed, low interest rates to prop up ever higher values and free money to go deeper into margin debt, but after the S&P 500 jumped to 2018 minutes after the announcement was released it dropped 60 points or almost 3% a day and a half later!  Had the Federal Reserve raised interest rates it may have cratered even more so it is clear that regardless of which direction they head the one banner of hope, the US Stock market, has decided that enough is enough.

Everywhere that you look people are losing their jobs.  HP, Qualcomm and the LA Times being the most recent companies to announce mass layoffs but I am sure there are more to come.  The slow down in China and the rest of the world is having a marked impact on large US business and this is feeding into an accelerating slowdown in the global economy.  Whether the market bounces around here for a while before cratering or whether it keeps accelerating to the downside it is clear to me that the world's economy is in bad shape and this will feed into market returns.

It is also clear that printing money and giving it to banks to exploit does not work.  It never has, it never will and it certainly is not working now but I am sure that if the market continues its downward spiral that they will fire up the printing presses in one more effort to prove that they can fix the problem with even more debt.  Moreover I expect that they will be joined by the rest of the world's central bankers in one last almighty money printing effort.  This is the fuel needed to explode gold and precious metal prices higher and with the mining stocks at decade lows it is, to me, the only place in the market to allocate investment dollars.

I have said it over and over in the last few months but I see no reason to invest in the stock market other than in precious metals and mining stocks but as those normally make up a very small portion of an investment portfolio I would advise cutting your exposure to a 10th of what it normally would be and wait it out or, as I am doing, find alternative investments that will take advantage of the situation and alleviate the daily stress of an overly hyped market.