Been a while…
since I last posted. Obviously things have gotten a little wooly since then. Of course, when I started this blog, I figured some people would read and comment, but that apparently takes more marketing acumen than I possess.
As I suggested here on Seeking Alpha, the market was highly oversold and due for a bounce. Little did I know all hell was about to break loose.
I caught a decent amount of the bounce, but frankly was underinvested. I’m still waiting for my pullback to add some more long exposure. At the rate this thing is moving, I’m not getting that shot. Even before today, I was desperately looking for some place to put more money to work and I couldn’t find one. Leave it to the Fed to spoil the party.
With today’s announcement, the Fed has crystalized a trend that I saw forming last week. I was worried about the fact that as the equity markets were rising, the dollar was falling. I sent my observation to a buddy at a hedge fund. He didn’t seem too concerned. Then today, BANG! The Fed drops $1T in future purchases on the market. The dollar index dropped 2+% after the announcement. It was the third largest drop in the index since 1970.
You do the math:
S&P index – up 2.09%
USD index - down 2.6%
What does this mean? Basically if you were fully invested in the S&P today, you actually lost money on a relative purchasing power basis… about a half of one percent of your wealth went up in smoke today. The S&P had the best performance today among the three major indexes in the US. If you were tilted more towards the others you lost more. If, sadly, you were sitting on a lot of cash today, you just got stone cold smoked by the Fed. 2.6% of your relative wealth just got vaporized.
Who were the big winners today? If you held 10-year treasuries, you made out like a bandit. If you held gold or silver either through an ETF or physically, you made out a lot better.
Strange times indeed.
