For all you obscure holiday buffs out there, today is the first Friday of May: International "No Pants Day." (Seriously, look it up) The annual event seems especially relevant seeing as the U.S. Federal Reserve has just been caught with its metaphorical trousers down.
Follow along. Since March 2009, the Fed has been on a credit-easing crusade of unprecedented scale, culminating in these two offensive lines of attack:
March 18: The Federal Open Market Committee announced a new plan to transfuse an additional $1.5 Trillion into the anemic economy, including the purchase of larger US Treasuries.
March 25: The Fed authorizes lending of $300 billion to private investors for distressed asset purchases.
Combined, it's the single largest inflation creating scheme in U.S. history. And, by that right -- the single biggest piece of BULLISH bond news since the time of Buttonwood trees. On this, the following news items from the time capture the full extent of the mainstream's high hopes for low interest rates:
- "Government Efforts Help To Stabilize the Lending Markets" (Wall Street Journal)
- "Fed's Purchasing To Weigh On Yields... The absence of supply combined with the Fed buying will be positive to Treasury prices." (AP)
- "Central Banking Buying Bolsters Bond Prices...The moment still belongs to the bulls. Buying government bonds helps lift pries and push down yields." (Dow Jones & Company)
YET -- in the days and weeks that followed, bond yields turned UP.
Let us recap. The Federal Reserve launches the most significant inflation-inducing strategy EVER, and -- Treasury yields vault to their highest levels for this year. Here, the brand-new May 2009 Elliott Wave Financial Forecast offers the following close-up of the event:
In the words of the May Financial Forecast: This graphic "shows once again that investing in accordance with government edicts and actions can be hazardous to one's financial health."
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