Special Guest: Peter Boockvar, Managing Director, Chief Market Analyst with The Lindsey Group, a macro economic and market research firm. Prior to joining The Lindsey Group, Peter spent a brief time at Omega Advisors, a New York based hedge fund, as a macro analyst and portfolio manager. Before this, he was a partner at Miller Tabak & Co for 18 years where he was recently the equity strategist and a portfolio manager with Miller Tabak Advisors. He joined Donaldson, Lufkin and Jenrette in 1992 in their corporate bond research department as a junior analyst. He is also president of OCLI, LLC and OCLI2, LLC, farmland real estate investment funds. He is a CNBC contributor and appears regularly on their network. Peter graduated Magna Cum Laude with a B.B.A. in Finance from George Washington University.

Financial Repression

"Financial Repression is the artificial suppression of interest rates well below the rate of inflation and well below what they would be otherwise if set by the supply and demand for money. That is what should determine what the cost of money is!"

Supply & Demand Consequences

"The central banks are pressuring you to act today in some activity that you would otherwise have done tomorrow. They want you to buy a car today, they want you to buy a house today, they want you to buy that stock today - not tomorrow. It just pulls demand activity forward! When this begins, activity in the short term accelerates both in terms of both economic activity and higher asset prices. At some point you reach a wall where you have pulled forward so much activity that you have reached the law of diminishing returns!"

"All of this has pulled forward future returns on asset prices, but that doesn't stop asset prices from going higher! ... "You get short term benefits but at the expense of long term costs. You pay for it over the long term."... "What the central bankers actually end up creating is Deflation because of the excess capacity build-up to match the artificially created demand!"

We have Deflation presently in Commodity prices but in the US we have Inflation in Professional Services.

"Central Bankers have 'mucked' up the entire concept of Supply & Demand and price discovery. All the various inputs are 'out of whack' relative to where they would be historically!"

Potential Fed rate Increases

"This ends when Inflation actually starts to increase! When Interest Rates do start to rise and in affect take away the printing press of the central bankers. Right now Central Bankers have given themselves license to do what they want because at these low levels of inflation, but at some point the bond market is not going to be so accommodating!"

The Central Bankers are trapped in a policy they can't get out of. It is ridiculous that after 6 years of ZIRP everyone is 'freaking out' over a mere 25 basis point increase.

The Fed's academic econometric models are flashing red over labor market metrics. Therefore they will increase rates in June irrelevant of whether that is actually the right thing to do (assuming you believe the Labor numbers) . That is what guides them.

"The issue is not whether the Fed raises rates but rather the turbulence it causes and what it means to potential future rate hikes."

A Major Correction is Potentially Just Beginning

The combined Fed tightening and a changed earnings picture suggest the basis for rising equity markets is no longer there. The Multiple expansion game is not there.

"How far we decline I am not sure. I am not sure where the Yellen 'Put' is. It is an 'out of the money' Put, but I am not sure what the strike price is! I don't know if it is 15% or 25% lower. I am pretty sure if we are down 20-25% Yellen will cut rates below where she has them after raising them in June. I would then not be surprised to see another round of QE."

At Some Point The Fed Will Lose Control

"We know the Fed lost control of commodity prices. The Fed is trying to generate inflation and commodity prices have gone the exact opposite way! At some point they are also going to lose control of stock prices."

"ECB QE was the final act of Central Bank Largesse!"

"There is literally Monetary Madness Going On!"