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A common theme this week which so far has been marked by lackluster performances. One of the breaking stories for this week was the Federal Reserve’s rejection of Citigroup’s plan to raise its dividend and increase its stock buyback. Citigroup is also one of the few names on the fail list of the Fed’s “big bank stress test.” This latest setback not only threatens his future at Citi, but also the stability of their management team. The tragic irony in this banking cartel drama is that these so-called stress tests are completely irrelevant unless the Fed also subjects itself to such a test.

Since central banks across the democratized world are responsible for directing monetary policy, adjusting liquidity flow against economic conditions. With the unprecedented scope of monetary intervention that the Fed executed in order to combat the 2007 recession, its balance sheet has tripled in size. This and other reasons are why alternative asset investors, who may be taking hits in gold, silver, or even bitcoin now, may just become the last ones laughing.

Equities

Let’s get started in the equities sector, which rang in flat following geopolitical concerns, as well as stubborn growth metrics from China and other emerging markets, a common theme this week which so far has been marked by lackluster performances. The benchmark S&P 500 closed at 1,849 , down -0.19 %, with the Dow Jones Industrial Average not faring much better, ending virtually at parity against the prior session. The NASDAQ led the way in terms of losses, shedding slightly more than half a percent of valuation.

Citigroup in Fed’s Fail List

One of the breaking stories for this week was the Federal Reserve’s rejection of Citigroup’s plan to raise its dividend and increase its stock buyback, which would have provided compensation for shareholders whose stock has underperformed. In the past year Citigroup shares have gained just 13% while J.P. Morgan shares were up more than 25% and Bank of America stock gained just over 40%. This marked the second time the Fed has rejected a Citigroup capital plan.

Citigroup is also one of the few names on the fail list of the Fed’s “big bank stress test,” a topic of which is sure to come up in light of its CEO, Michael Corbat, and his enormous compensation package of $14.3 million dollars, which he explained was a result of his improving “risk outcomes and controls.” This latest setback not only threatens his future at Citi, but also the stability of their management team, where Corbat only recently replaced the former chief executive, Vikram Pandit, some 18 months ago.

The tragic irony in this banking cartel drama is that these so-called stress tests are completely irrelevant unless the Fed also subjects itself to such a test. Since central banks across the democratized world are responsible for directing monetary policy, adjusting liquidity flow against economic conditions, it’s only logical that a car’s engine be checked first before worrying about auxiliary concerns such as tire pressure.

With the vast and unprecedented scope of monetary intervention that the Fed executed in order to combat the 2007 recession and the shock deflationary collapse one year later, its balance sheet has tripled in size. Worse, the full-spectrum attacks on the yield curve has led to a compositional risk that has extremely serious repercussions should the Fed fail the delicate balancing act it pushed itself in.

Alternative Asset Investors May Have the Last Laugh

This and other reasons are why alternative asset investors, who may be taking hits in gold, silver, or even bitcoin now, may just become the last ones laughing. With so many fundamental hotspots that can easily erupt overnight, combined with the fact that the Fed is deliberately attempting to divert eyes away from the real problem, there seems to be little sense in holding 100% of your money in the clutches of the current financial paradigm, whether this be a 401K, an IRA, or God forbid, the new Obama retirement mandate, the “My-RA,” which apparently combines the saving ethic of a capitalist system with the money flow of a socialist system, otherwise known as “you pay, they play.

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