m Rickards Tells His Clients To Get Out Of Stocks And Discusses The Fed’s Final “Golden” Bullet

Tuesday, September 7, 2010
By Paul Martin

by Tyler Durden

The increasingly more popular Jim Rickards once again takes center stage at King World News, this time focusing on the two ever-fascinating topics of market manipulation and hyperinflation. Kicking it off in fine form, Rickards notes that the “markets have ceased to function as they are intended – traditionally a place to exchange values, but more importantly to perform price discovery (people rely on markets to tell them what to do or to at least give them some guidance). What’s happened is that all the markets have become so badly distorted that their price discovery function and therefore the information content around it no longer has any value.” The primary culprit in this distortion is, of course, the Fed which is now and has been for over a year, openly (and not so openly when it comes to stocks) manipulating the broader market: “I always like to say if a private sector person does it, it’s manipulation, but if the government does it it’s policy. So they call it policy and they would say they had reasons for it, but in fact it was massively distorting.” And on the oh so obvious extension from this argument to the “$1 trillion+ cash on corporate balance sheets” theory, Rickards says that this is “not healthy at all, that’s a very negative sign because it means that people are afraid to allocate capital because they can not get good information from the markets. In effect the US and policy intervention from homebuyer tax credit, cash for clunkers, quantitative easing, mortgage purchases have in effect destroyed our markets, they no longer give us valuable information.” Obviously, today’s most recent battery of micro fiscal stimuli announced by the administration will merely make the market even more irrelevant as a price discovery and a capital allocation deterministic mechanism: and the more administrative meddling, the more money will sit on the sidelines, and the more retail investors will withdraw capital from risky assets. If you no longer invest in stocks, you are not alone: “I don’t even take the stock market seriously” says Rickards, “and I mean that in all seriousness. Who’s in the stock market right? You have indexers and robots. Is anybody else trading the stock market?” Obviously, that is a rhetorical question.

The Rest…HERE

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