Well we are nearing the end of the first month and it has been a wild ride for equity and treasury markets and it looks like it will continue today.
As we write the 10 year treasury yield has plunged 5-6 basis points and the Dow futures are showing a opening that is down over 200 points. For this month preferreds and debt issues have done fairly well, while common stocks have been getting spanked.
What is one to do? There is nothing one can reasonbly do---"...
This is because the Federal Reserve has reduced its purchases on Wall Street by $10 billion per month from $85 billion to $75 billion. (Federal Reserve purchases are loans to the Federal Government.) This plunge in the stock market is no surprise except for those who think that unbridled government borrowing, which is pumped into the stock market, is a plus and has no consequences. Increasing the national debt by these amounts absolutely must be reflected at some time in the stock market.
As the Federal Reserve spending is ratcheted back the results will be horrible, and if they are not ratcheted back the results will be horrible.
