Friday, April 13, 2012

Fed-Speak and The Power of Words

Words have power, make no mistake. Once said, they are impossible to retract. When words are negative or hurtful, we can spend lots of emotional energy trying to come up with more words to fix the brokenness.

Lesson: Always think about what you say before you say it as words can create a reality that you might not like.

Note to Federal Reserve. Be careful what you say from now on. We hear your words and we know your game.

You see, the Fed has a way with words, a method of saying things that are brilliant in their execution and content, and leave just a little room for interpretation.

When the markets are showing signs of going against them, they trott out various heads of regional Reserve Banks in the USA and signal to the market their next moves. Yoday, they signalled more QE (actually 'steralized QE, but what is that other then an oxymoron). The S& P 500 and Dow had been going down below critical moving averages, so they 'speak' and boom, up they go.

Just last month, they 'spoke' no QE and down went commodities and risk investments declined. Oh, if only our words were that powerful. Speak and trillions of dollars flood one market, speak again and trillions flow back out. I guess if you are first to hear the words you could easily make billions; but no one would be in that position, would they?

It's all rather a nonsense and a desperation to keep the sick beast alive. Soon, the words spoken will have to be dealt with. Have to be 'fixed'. The market will die and correct, its the way it always works. No amount of talking will substitute for hard reality.

Too much debt. Too many promises. No substance. When no one believes your words anymore, you may as well be a hermit. Now there's a thought; Saint Ben.

This all leads to a piece I want to do next week on the housing market here in New Zealand. The market is still quite bouyant. The important words to note going forward in this market though are 'interest rates'.

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Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $39.03 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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