Retarded monetary policy is welcomed by markets and by analysts who tend to 'rationalize' the poor GDP (really horrendous considering how long this is into what is a so-called recovery); rather than recognize that Fed low-rate policies have been counterproductive, directly and indirectly contributing to the inability of the Nation to recover meaningfully.

Those policies not only painted the Fed into a corner some of them wish they had eased out of years ago, but make it increasingly difficult now. Either way they will receive the blame for the encroaching shakeout (or worse); and either way there is a realization (or should be) that we've been in a 'deflation' for years; something I've termed a 'Controlled Depression.'

They controlled matters so well, that what occurred is dramatically increased debt, which pulls consumption from the future; however without really revitalizing family (household) incomes, while skewing equity valuations into stratospheric risk levels; whether it holds together a bit longer or not.

Speaking of that; yours' truly heads back to the U.S. on Tuesday; thus we thank of course the US market for being erratic but generally stable during my travels; and if it is slightly cynical or not, suspect the market has some chance of repeating what it did last year, as a friend of mine here in England reminded me at lunch today that I had pointedout; which was to mount a welcome rally on my first day back; then to tank almost immediately thereafter. Can history repeat again? We'll soon find out.

Measuring discounted cash flows and future earnings of a company or market has a traditional purpose, that is largely ignored by this kind of artificial market based on yield-chasing and flight-safety capital flows, and little else. That means distortions at this point are about the same as they were a month ago (perhaps worse given a horrific realization of GDP, as I discuss a bit in the 2nd video this weekend); and as the market does meander in the same range it's been; it could easily pop and flop.

Meanwhile the Bank of Japan surprised markets by not lowering rates even more; a move that cause USD/JPY to plunge yet again. Tokyo might wisely not intently be listening to retired-Fed Chairman Bernanke's advise; as previously speculated. The story was out there yesterday that they'd do a 'helicopter money drop'; not so far.

In sum: markets have been erratic but generally in a range for several weeks now, as I wrap up my travels. While that doesn't ensure a significant move upon return of course; the conditions for the market failure to really capitalize on 'bad news' for more than bounces, is becoming self-evident.

The jobs situation is really pathetic for the mass of average workers. In fact, with a low return for risk-averse retirees, you have unprecedented proportions of older Americans not only working, but seeking jobs. The trend has been for a majority of all (non-technical skill) jobs (as high as 90%) going to those age 55 and over. Now for sure 55 is not really a retirement age; but workers at that age either are settled in a job or career or not actively seeking new employment, except in this situation.

All of this is just more evidence that while counterproductive policies won't readily reveal 'whether or not' the Country would have done better had the Fed withdrawn the excess stimulus and 'accommodative' policy as they call it sooner; there is no doubt that 'baby boomers' are working longer and often taking jobs traditionally that go to younger citizens. The additional aspect is a decline in productivity; not that an older worker isn't equally efficient; but how this focus on aging workers impacts the participation rates and output. It also focuses on older Americans spending more in 'essential' areas, rather than on the discretionary spending normally expected.

It's a part of the demographic shift that works against not only the American dream of a home owned (ideally free & clear prior to retirement); but a retirement lifestyle many historically wanted (and fewer do now or so it seems; which is distinct totally from the reticent to travel among those who can, due to the global situation today).

Bottom line: pressures whether by banks (domestic and foreign) or pension funds try to rationalize a takeaway of 'averted disaster'. But that doesn't spell opportunity, or the ability to build capital with near-zero (or worse) returns. There isn't a financial pathway to grow their way to better prosperity; with few issues solved by the news. As we moved toward the close Friday, there were stories that consortiums indeed were able to corral sufficient funds to circumvent any concerns from 'stress tests'.

These may seem encouraging; but clearly reflect the industry's (and central banks) needs to shore up confidence, especially in Europe where many not only suffer the negative returns, but pay for the privilege of depositing their funds in a bank.
 

July finished on a firm note; we suspect the market tries again next week; but we'll be prepared for a faltering within days; although not dramatically at least initially.