Is the Fiscal Cliff Just Too Big to Save?

“We cannot offset the full impact of the fiscal cliff — it’s just too big”

–Dr. Ben Bernanke, Chairman, Federal Reserve

Index ETFs finish mixed and flat after way too much QE4 and Congressional bickering

Where do we start with the debacle of our Index ETFs and United States as a whole?  The SPDR S&P 500 ETF gained .05% after the Fed announced QE4, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) added .01% (really?) after the Fed announced QE4, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .21% after the Fed announced QE4, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .56% after the Fed announced QE4.

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So, Dr. Bernanke’s $45 million per month additional purchases of US Treasury Bonds  comes on top of the $40 billion per month of mortgage backed securities that the Fed is already buying.  And, Dr. Ben has indicated that he will keep both purchasing programs running until unemployment dips below 6.5% (in other words, indefinitely) in addition to keeping interest rates at a big ol’ near zero.  So, even though the official name of today’s easing bonanza is called QE4, perhaps we should be calling it QE 3.5?  Also, should I feel relieved that inflation is not expected to rise above 2.5%?  I don’t think so, as the US Dollar will likely continue to be beaten into more of a bloody pulp than before.

Wednesday’s easing bonanza was also short lived by index ETFs, as markets and index ETFs quickly rose in excitement and then immediately cratered to flat and mixed.  So basically, Dr. Ben’s easing injections are not as potent and not so long lived as they once were, which is incredibly troubling because I believe the man has run out of bullets to save this whole thing from falling off the cliff.

But we do not have to worry about the Fed not being able to keep us from falling off of the cliff, because Congress might run us off of the cliff anyways, as Congress, not surprisingly I might add, has not yet reached a fiscal cliff deal.  House Speaker Boehner has called on the House to cancel any holiday plans, as the fiscal cliff is now just 19 days away, we are just one day closer to a 4% decline in GDP come January, and this Congressional session officially ends this Friday.

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What really makes this whole situation all the more awesome is what Dr. Bernanke stated today:  “We [the Fed] cannot offset the full impact of the fiscal cliff — it’s just too big.”  This shiny statement comes at a great time right?  The Fed is out of bullets, we are veering towards a 4% recession in 2013, and Congress and the President are still bickering.  In short, I am scared for my country, as anyone five years ago could not have made up this nightmare, let alone dreamed it, and worst of all, we might have to live it in just 19 days.

Ok, enough doom and gloom for now, because, the beauty of our system is based on the fact that we have the freedom and choice to make money in even the worst of times, and this country has been through much, much worse.  Problems arrive “hand in hand” with opportunities, and even in our small microcosm of advanced traders, we always try to make money in up or down markets by utilizing the power of Exchange Traded Funds.

Bottom line: The United States is in a big mess currently, and no amount of QE4 or Congressional bickering is going to fix it, at least for today.  Despite all of the troubles however, problems and opportunities always arrive hand-in-hand and money can always be made.  Even in our small world, we can always prevail with a disciplined approach to trading these turbulent times via Exchange Traded Funds (ETFs).

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John Nyaradi is the author of The ETF Investing Premium Newsletter.