Fed Policies creating enormous amounts of paper

“By creating enormous amounts of paper, and hoarding higher duration securities like Treasury securities, the Fed is trying to force investors into risky assets until the prospective returns on all competing assets are driven so low that investors and banks holding cash are willing to just sit on it. In short, the Fed has focused its efforts on creating a bubble in risky assets, on the misguided, semi-psychotic, and empirically disprovable notion that this will make people feel wealthier and get them to spend and borrow – despite the fact that their incomes can’t support it without massive government transfer payments.”

The above commentary is from the Hussman Funds’ latest Weekly Market Comment, entitled “A False Sense of Security.” As is evident from the content, Dr. John Hussman is not a big fan of Ben Bernanke and his monetary policies.  In his piece, the long-time Fed critic and investor discussed his particularly dire outlook for the markets in light of “an unusually hostile set of indicator syndromes, most notably, an ‘overvalued, overbought, overbullish, rising-yields’ syndrome that has historically been unfavorable for stocks regardless of prevailing Fed policy or trend-following indicators.”