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| Name: |
MrHodja
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| Subject: |
Business-Savvy Posters Please Explain
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Date:
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3/7/2013 8:51:58 PM
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What is the reason behind the Dow doing so well when the rest of the economy is still in the tank (Yes, archie, not quite as far into the tank)? Is it the pumping of egregious amounts of cash into the system by the Fed's QE gyrations? Is this the beginning of the hyperinflation that many fear? Is my somewhat comfortable retirement going to be reduced to starvation level?
URL: Dow Reaches Another High
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| Name: |
MartiniMan
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| Subject: |
Pumping up by the Fed
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Date:
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3/7/2013 9:37:02 PM
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The Fed continues to pump money into the economy and Wall Street likes it a lot. Means lots of liquidity and low interest rates. However, the chief fear with pumping by the Fed is inflation. If or when that happens (depends on who you talk to) you will see interest rates rise quickly as the Fed tries to control inflation and potentially or probably a collapse in the bond market like we saw in 1994. That will be a huge shock to the economy and likely send stocks sharply downward.
What worries me is the stock market is rising not because of any fundamentals but because of Fed intervention. The history of that kind of intervention has not been good. Anytime a bubble is created by govt intervention the piper has always needed to be paid eventually. I don't have a good feeling about how this is going to end and if I were close to retirement right now I would probably exit equities. The problem though is where to go with the money. Bonds are equally risky. Real estate is still a very long term play. And money markets can't even keep up with inflation. And speaking of which, the last place you want to be in an inflationary period is in cash. Precious metals may be a wise choice for a portion of your portfolio.
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| Name: |
water_watcher
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| Subject: |
Pumping up by the Fed
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Date:
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3/7/2013 9:51:15 PM
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Good summary ... I would also add that the fed action is to make risk assets like equities the only option if you want any yield. That is intended to create the wealth effect and the positive headlines boost consumer confidence and the thought is it will get people to spend more and that then creates jobs.
But the sad part is they have been doing this for 5 years ... it has grown equities but little on real economic growth because Obama policies are having the opposite effect.
The printing of dollars, as you say is inflationary, but the fed wants a weaker dollar to make exports to other countries more attractive and affordable.
They say they will keep this policy and the artificially low interest rates until unemployment is 5.5% ... at the current pace that is still several years.
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| Name: |
MartiniMan
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| Subject: |
So true
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Date:
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3/8/2013 11:07:28 AM
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That's the theory and the Fed is betting the collapse of the bond market, which will come when inflation hits and interest rates start to rise, will have less impact on the equities. Based on 1994 that seems like a reasonable bet but what is different is that in 1994 equities were propped up by an improving economy and not by Fed quantitative easing. Makes me very nervous and I'm wondering if both will be slammed when the inevitable happens. But maybe they ascribe to the Keynsian attitude that who cares, we'll be dead by then!
Either way, this stock market rally is being artificially fueled and could collapse like a house of cards, which is what the contrarians are saying long and loudly. I will take my cue from one of our Wall Street investors (big pension fund). He told us to get our money into t-bills two months before the collapse of the banks. Saved us a lot of money and angst as they sorted that mess out.
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| Name: |
realfast64
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| Subject: |
Pumping up by the Fed
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Date:
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3/8/2013 11:11:26 AM
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I wonder what part 3 of our 4 nuclear aircraft carriers being docked in the same port has to do with all these numbers our adm. throws at us.
Printing 85 billion each month maybe we should print an extra 5/10 (LOL) billion so we could afford to get at least one of those three back in service.
To put in in a better perspective we are a FROG in water!! To boil him you place the frog in a boiler add water till covered and place on stove bring to a boil and let simmer.
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