Equity investors (stocks) should be very cautious. This week could be a bad one for stocks. Both the ECB and the Fed disappointed by not announcing new liquidity measures.
There is no good news in economies, any economies. Why stocks have remained where they are is likely a belief in additional liquidity to drive them. With the current economic situation and collapsing finances around the world, stocks may adjust rapidly downward.
The Fed has only one bullet left and it is not a silver one. I suspect they know this bullet — more monetary easing — will be held to juice markets when needed.
My two cents, but that is about all I would invest in this stock market.
RChavez: 
HappyinHowell: 
Mr Misno: 
Marsha: 
Brian Wilson: 
Steve: 
Larry Crouse: 
Brian Wilson: 
Monty Pelerin: 
Bob Snyder: 
Hi Monty, I appreciate your view. I am curious though, that perhaps the Fed isn’t “announcing” new liquidity measures but just doing it, and then letting the public figure out for themselves: here is one that Zero Hedge announces:
http://www.zerohedge.com/news/sp-above-1400-fed-conducts-second-600-million-repo-following-nearly-4-year-hiatus
For what it is worth, I haven’t even 2 cents in my US stocks (DIY portfolio)–rather I’m keeping a large (for me) short position in US dollars. I believe the bst way to benefit from inflation is to borrow money: short US dollar, long physical gold, silver, Canadian oil & gas, gold mining and sugar (rsi.to). Cheers
Peter
The Fed will do whatever it can without raising inflation expectations. Surreptitious easing may be hard to spot, however. Normally one can track assets on the Fed’s balance sheet to understand what is going on. If they go up, easing is occurring regardless of what they say.
The problem today is the immense amount of excess reserves in the banking system. These are held by banks either directly or as balances at the Fed. The Fed has enough leverage over banks to order them to employ these reserves to purchase government bonds. This does not show up as a change in the Fed assets, nor is it technically Fed easing. It is, however, a surreptitious way to fund government deficits. It is the unfundability of these deficits that will ultimately bring the Fed back to QE, however they don’t have to intervene to keep government solvent so long as they can command banks to do the work for them.
Until banks run short of excess reserves or balk at Fed commands (unlikely) it will take financial market suffering to bring the Fed back to QE. That could happen next week or next year. I don’t think the pressures on markets will take a year and I don’t think banks can fill in for the Fed for more than a year.
Monty, this is an awesome comment and the accolades and notice you are getting is very much deserved. You have taken a complicated matter and explained it in a way that makes sense to the lay person.
I had suspected that the US government and Federal Reserve were forcing primary dealers of Treasury to buy the US debt that no one else would, and that is what is keeping the US from admitting its insolvency. This keeps the easing off the balance sheet of the Fed: the Fed is turning short term debt into long term debt and the burden of buying the short term debt and some of the new debt is put on the primary dealers. This means that the actual liquidity in the market place is still being reflated even as some credit markets are about to collapse–I think of the student debt bubble, which seems to be another one that is coming down, and this will lead to the next TARP and obviously more easing because the Fed will have to reinvigorate bank reserves AND cover the spending needs of the Federal government. It is an inescapable to conclude that the Fed and the banks are covering over the insolvency of the United States; and that you must be right, it is being done in such a way to avoid raising the expectation of inflation.
Jim Grant has the best analogy for the financial system. It is the Truman Show and one day Truman is going to run his boat into the edge of his fake reality.