Taper. A term closely associated with types of haircuts, candles, and earrings is now being used to describe the Federal Reserves Monetary policy.
A Google news search provides no fewer than 1,000 recent articles concerning the term "taper".
Just like the 'fiscal cliff', the 'sequester' earlier this year, and Cyprus, the Great Taper offered investors a chance to unload stocks yesterday. How has selling the fear mongering worked out recently?
Taper. Isn't that a term that refers to something gradual? Why did stocks sell off like they did yesterday after hitting new all time highs? Taper:
- To become smaller or thinner toward one end.
- To grow gradually lean.
- To make gradually smaller toward one end.
- To reduce gradually.
A gradual removal of the FED's support for asset prices shouldn't result in a market crash, and that is assuming they do indeed raise rates and curtail QE at some point. I think we are far away from that happening. The Great Taper, just like the Fiscal Cliff, Sequestration, Cyprus, and every other pull back we've seen since the March 2009 lows, is a chance for the media to latch onto a story, anything, to garner interest from their viewers and readers. A chance to lure investors into selling. After such a strong rally in stocks, a pull back is welcome. It offers another chance to squeeze a brand new group of shorts.
Sequester? Fiscal Cliff? Cyprus? While initially negative for stocks, all three were great buying opportunities. In my opinion The Great Taper will look like more like a Great Caper for those buying the dips.