I’m currently working on a Bible prophecy piece for an upcoming post, but I’ll leave you my thoughts on a headline that really stood out today...
Last week I covered a topic that a lot of people in the media have not been talking about: the Federal Reserve’s apparent intervention into the stock market via its Permanent Open Market Operations (POMO). Recall that I mentioned that some people believe the stock market is artificially inflated as a result of the Fed’s POMO activities.
This morning I encountered a really good article published by Zero Hedge that analyzed the rates of return on days when the Fed conducts POMO activities versus days when the Fed does not conduct POMO activities. The article can be found at the following link
The article shows that the stock market tends to perform extremely well on days when the Fed conducts POMO activities (51.3% annualized return) and tends to perform poorly on days when the Fed does not conduct POMO activities (-4.7% annualized return). The dramatic difference between the stock market’s performance on POMO days and non-POMO days gives more credence to those who argue that the Federal Reserve is artificially inflating the stock market via its POMO activities.
It’s also important to note that money flowed out of domestic equity (stock) mutual funds in the month of September despite the stock market having one of its best Septembers in a long time. One wonders, “Who is buying stocks if investors have been taking money out of the stock market?”
- A potential answer could be corporate insiders who know what business conditions are like. However, recent data suggests that corporate insiders have been selling their own stocks at a mind-boggling rate. Therefore, investors and corporate insiders are not the ones responsible for the stock market’s recent strong performance.
Given all of the recent POMO activity that the Fed has conducted and the historical evidence that the stock market tends to perform extremely well on POMO days, the Federal Reserve and their primary dealers become prime suspects…
