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The Fed-Induced Stock Market Bubble Continues

Quantitative easing programs have not worked either, unless you like bubbles that always pop. Bubbles in Comex gold and Nymex crude oil have popped. The housing bubble has popped, but is re-inflating. The stock market bubble has yet to pop despite the ValuEngine valuation warning.
[Read: <a target="blank" data-add-tracking="true" href=""><em> Your Commute Is Killing You</em></a>]

Here's how to make Fed policy more Main Street friendly: Raise the federal funds rate to 3% and stop both QE3 and QE4.

Instead of QE3 and QE4 the Federal Reserve should implement a community bank credit facility to set a 30-year fixed rate mortgage at 4% and set a small business line of credit at 6%. Funds would be funneled to regional and community banks with assets between $10 billion and $100 billion. Mortgages should be plain vanilla pass-throughs with the small business loans similarly structured. Securitization of pools of these loans should be structured using the government backed Ginnie Mae program. Instead of the QE's these securities could be purchased by the Federal Reserve.
[Read: <a target="blank" data-add-tracking="true" href=""><em> The 5 Dumbest Things on Wall Street This Week: Nov. 1</em></a>]

This strategy would support the U.S. economy from the bottom up rather than from the top down. Providing free money to Wall Street creates bubbles and that has to stop!

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier is the chief market strategist at AlphaPlus Analytics in addition to He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at
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