What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.I’m not surprised that almost every index you can look at … was down significantly. [Referring to the results in the stock market after the Fed raised rates in December.]Basically, we had a tremendous rally, and I think there’s a great digestive period that is likely to take place now, and it may continue.We front-loaded at the Federal Reserve an enormous rally in order to accomplish a wealth effect.I wouldn’t blame [what is happening in the market’s now] on China. We’re always looking for excuses.I wasn’t surprised at last year. And I wouldn’t be surprised at a rather fallow performance this year as well.A lot of people are building cash positions…. Those [investors] that are taking a longer term view are being extremely cautious here, are raising their cash levels, are nervous about the valuations that are in the market.The values are very richly priced here, so I could see significant downside.
I was warning my colleagues, “Don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.
The Federal Reserve is a giant weapon that has no ammunition left.You have to be careful here and frank about what drove the markets…. It was, the Fed, the Fed, the Fed, the European Central Bank, the Japanese Central bank … all quantitatively driven by central bank activity. That’s not the way markets should be working…. They were juiced up by central banks, including the Federal Reserve…. So, I think you have to acknowledge reality.