I was at the gym yesterday, and the TV sets in the locker room were turned to CNBC. Folks were dressing, shaving and showering. However, no one was paying attention to the blather on the tube.
The guest for the segment was doing his best to generate excitement for QE2 and how stocks, commodities and just about anything that moves were going to "melt up". To paraphrase the analyst: "If $1 trillion doesn't work, then the Fed will do $2 trillion. They will do whatever it takes to stimulate the economy." Of course, the analyst didn't think any of this would actually help the economy, but he was pretty confident where the markets were headed.
As I looked around the locker room, all I could think about were the disconnects on many levels.
There is the disconnect between the average investor and this market. People don't care like they used to and they are not interested in the markets no matter what. Maybe they have heard it all before and been burned. Maybe they realize that the guest has about as much of a chance of being correct as a monkey throwing darts at the stock tables in the newspapers. Whatever the cause, the average investor showed little interest in the nonsense put forth by this analyst.
But I sensed another disconnect and this is the one between Main Street and Wall Street. As you listen to the interview, the analyst is clear that QE2 is unlikely to work on Main Street, but that is ok, because it is going to work for Wall Street. For the analyst, that is good enough reason for the Fed to move and mortgage our future. There was no thought of the consequences of the Fed's action. There is no thought what so ever that our markets are no longer transparent and open. The only thought was stimulus equals higher asset prices.
Why should QE2 work at all? QE1 failed to right the economy. Why do we need to bang our heads on the wall a second time? Oh silly me....that's right. We aren't talking about the economy here we are talking about the stock market. I suspect most investors are beginning to see through the charade that a higher equity market means good times ahead for the economy. It doesn't, and this has become the biggest disconnect of all.
Here is the video of Brian Kelly from Kanundrum Capital.