E Investors Act Like Spoiled Children

When a small child wants some candy or a treat, they usually ask for it. When they don't get it, they might throw a temper tantrum. They might also throw a tantrum when they want more: more candy, more dessert, etc.

The parents, hopefully, are cognizant of certain issues; such as the negative effects of too much sugar, and when the timing of indulgence might be inappropriate. A candy bar or ice cream cone one hour before dinner, on an empty stomach, might be too much for the child to handle and assimilate. It might also interfere with the potential to get something of better nutritional value into their system.

Of course, power and control are factors, too. Even without too much deep psychological analysis, it is not difficult to see how the parent's ego and the child's ego work to circumvent each other.

Recently, investors (the children) voted in the affirmative for more QE by the Federal Reserve (the parent) by bidding up prices of stocks, bonds, gold, and silver. The anticipation of further interest rate reduction efforts by the Fed fueled appetites of investors for their asset of choice.

The Fed, acting out its role as a parent, announced the expected .25 point rate cut, but investors wanted to know more about what comes next, and when. What they heard was not music to their ears.

Interday highs and lows spanned a range of 1% in stocks and more than 2% in gold and silver. Not necessarily huge, but swift and noticeable.

Beyond that, it is simply more of the same. Each Fed announcement is parsed carefully for anything that might suggest "more treats are coming for the spoiled children". When the candy runs out, the tantrums will be worse.

Heaven help us all when the children find out that the promised treats don't taste good anymore.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN'T, AND WHO'S RESPONSIBLE FOR IT and  more

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