However, given the steep ascent and overbought conditions by the Phisix, expect temporary corrections and possibly rotational activities.
I believe that should an interim correction emerge from an overheated Phisix occur, then rotation dynamic will reinforce the current inflationary boom.
In spite of all the euphoria, the FED’s operations may likely be reaching a tipping point.The combined monthly $40 billion MBS purchases by US Federal Reserve, as well as, the $45 billion long term (10-30 year) US treasury bond buying from Operation Twist means that the Fed’s balance sheet is likely to expand to about $4 trillion by the end of 2013 from $ 2.8 trillion or an increase of about $1.17 trillion, according to Zero Hedge.Yet the sterilization measures by Operation Twist of selling $45 in short term bonds to offset the long end buying will likely end by this year as the Fed runs out of short term securities to sell.Essentially, roughly half of the US budget deficit will be monetized by the FED.
But it seems obvious as soon as one once begins to think about it that almost any change in the amount of money, whether it does influence the price level or not, must always influence relative prices. And, as there can be no doubt that it is relative "prices which determine the amount and the direction of production, almost any change in the amount of money must necessarily also influence production
That is a 2.5% inflation target by any other name, and it's striking to see a central bank in the post-Paul Volcker era say overtly that it wants more inflation
there has never occurred a hyperinflation in history which was not caused by a huge budget deficit of the state.
It's tempting to think that somehow printing money means an increase in spending power, while issuing bonds means that the government is taking something in return for what it spends, but it's important to focus on the general equilibrium. In both cases, regardless of whether government finances its spending by printing money or issuing bonds, the end result is that the government has appropriated some amount of goods and services, and has issued a piece of paper – a government liability – in return, which has to be held by somebody. Moreover, both of those pieces of paper – currency and Treasury securities – compete in the portfolios of individuals as stores of value and means of payment. The values of currency and government securities are not set independently of each other, but in tight competition...To the extent that real goods and services are being appropriated by government in return for an increasing supply of paper receipts, whatever the form, aggressive government spending results in a relative scarcity of goods and services outside of government control, and a relative abundance of government liabilities. The marginal utility of goods and services tends to rise, the marginal utility of government liabilities of all types tends to fall, and you get inflation.This is important, because it means that the primary determinant of inflation is not monetary policy but fiscal policy.
At the current average decay period of around 40% per action, we should see the ECB or Fed enact something new by around February 4th (just as the debt-ceiling comes to a head).