Janet Yellen’s Dirty Little Secret

Daily Chart May 28th InvestWithAlex

5/28/2015 – A down day with the Dow Jones down 37 points (-0.20%) and the Nasdaq down 10 points (-0.17%)

John Hussman had quite a few things to say about today’s market environment. Nothing that you haven’t read here before, but it is important to compare notes.

“The Fed has now created the third financial bubble in 15 years,” he writes in his latest market commentary. “Focusing on two variables — inflation and unemployment — the Fed has missed the most important consideration: the risk to financial stability.”

That’s what happened in last decade’s housing bubble, and “this mistake will ultimately end just as tragically” both for the economy and financial markets, Hussman states.

He is absolutely right. I wrote about the same thing in Peak BubbleS??? And it cannot possibly end in any other fashion.

As for stocks, “our concerns remain extremely high due to the combination of obscene valuations and unfavorable market internals,” he explains. “While we continue to monitor the evidence for any shift, it’s important not to assume that Fed easing (or a delay of Fed rate hikes) would necessarily provoke a favorable shift in market internals, or would necessarily produce a shift back to risk-seeking.”

Don’t count on a delay in Fed rate hikes boosting stocks, Hussman says. “Examine the worst market collapses in history, and you’ll often find the Federal Reserve easing the whole time,” he writes. “Don’t fight the Fed, indeed.”

Bingo. On two fronts. I can attest that I cannot find a single undervalued company in today’s market. Not to speculate in, but an undervalued company that I would feel comfortable holding over a long period of time. Everything has been driven to exuberant valuation levels. Second, the FED might be powerless to stop the next decline. No matter what they promise or how many more QEs they bring to the table. Once perception changes, the market will overshoot to the downside. As it always does.

“There seems to be a perception that central bankers are gods (or at the very least minor deities in some twisted economic pantheon). Coupled with this deification of central bankers is a faith that interest rates are a panacea. Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates. Economy too weak, then lower interest rates.”

I firmly believe that investors who are making their investment decisions based on what the FED will or will not do, will pay dearly for it. Just as they did in 2000 and 2008.The stock market doesn’t care about any of it. It will simply top out and initiate its decline when the TIME is right. Get ready.

This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.

(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. May 28th, 2015 InvestWithAlex.com

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