Many have been thinking and some have been saying for quite some time now that assets are egregiously overvalued because of Federal Reserve policy which manipulates the cost of money, the problem with which is that this short-circuits the process of price discovery.
Barry Ritholtz is especially famous with me because he came out at a critical time and wrote that perhaps the most important investing lesson you can learn is "don't fight the Fed".
Now we have proof of this of a sort from the NY Fed itself, showing that minus Fed witching-hour moves in the markets, the Standard and Poor's 500 index would stand nearer 600 today instead of 1300.
The almost laughable story is here:
The FOMC has released eight announcements a year at 2:15 ET since 1994. The study took the gains in the SP 500 from 2 pm the day before the announcement to 2 pm the day of the statement and subtracted that market move from the SP 500’s total return over that time span.
Without the gains in anticipation of a positive Fed action, the SP 500 would stand at just 600 today, rather than above 1300.
575 looks as good to me now as it did in August 2011, here.
575 looks as good to me now as it did in August 2011, here.
