Author: John King, Quacera
Covestor model: QPM Radar
The whipsaw nature of recent market trading continues.
The S&P 500 rose 2.3% in August despite little trading volume and no resolution to the big QE3 question.
QPM Radar, which covers the universe of ETFs we follow, remains at 96.37% positive and the composite of all stocks we follow are at 78.6% positive.
Europe is rallying on hope that the ECB will buy up the sovereign debt of its member nations despite evidence that no central bank in the world has successfully rescued its economy from the continuing debt destruction.
Printing money, austerity and higher taxes continue to be the wrong prescription. They have only succeeded in impoverishing the world’s savers while keeping the bloated banks and bankers in business.
Recovery must come from the private sector. Government has little it can do to foster it. What little it can accomplish is important. But this regime and its Fed backers are actually reducing their chances for success.
Here’s what has to happen: Incomes must rise to increase consumption. Business expenses have to fall so production is profitable. Regulatory and tax rules must be consistent and of long enough duration to give businesses the confidence to invest.
What we are seeing instead is 4,400 different federal tax law changes in the past 20 years; threats of higher taxes that encourage hoarding; and temporary stimulus schemes that slow debt destruction without ending it.
Profits that companies do generate are coming from cost cutting, not increased revenues.
It is no wonder that there is only a hint of economic growth without any trace of the economic coordination needed for true financial recovery.