NEW CHAIRMAN IN FED = STOCK CRASH !!!

By Robert McHugh
www.technicalindicatorindex.com

I did some research on how stock markets behave after a change in the Federal Reserve Chairmanship. We have had five new Chairpersons since 1970. In four of the five cases, within three years of the start of their terms, the stock market experienced a crash. Arthur Burns became Chairman in February 1970 and between 1973 and 1974 stocks saw a 45 percent crash. Volcker was appointed Chair in August 1979 and stocks crashed 23 percent from 1981 through 1982. Greenspan became Chairman in August 1987 and stocks crashed 35 percent in October 2007. Bernanke became Chairman in February 2006 and stocks crashed 53 percent from October 2007 through March 2009. Only G. William Miller became Chair over the past 50 years and no crash followed, however he only lasted 18 months on the job, so not sure he counts. If not, that is four for the past four. Janet Yellen takes over next month as the next Fed Chairperson. If history is to repeat itself, she also will see a stock market crash sometime in 2014 or 2015. That prognosis fits our technical analysis work.

Another way to look at all the QE programs, especially the latest QE 4 program where the Fed was buying $85 billion of U.S. Debt each month in exchange for freshly printed dollars, is that this is a systematic monetization of our national debt, a huge eraser, in effect forgiving our debt. Debt is gone, Dollars appear. At this pace the entire national debt, $17 trillion, would be wiped away in about 200 months, or 17 years. Slick. Once the debt is in the hands of the Government's piggy bank, the Fed, it is gone from the economy, gone from existence, only remembered as a notional memorandum on some Fed accounting report. This magician's trick is a house of cards, a slight of hand, a scheme that will not go unpunished.