The Few Remaining Investors Are Forced To Accept Both Poor Yields And Higher risk
Okay, the Fed’s recent decision to boost its monetary stimulus (a.k.a. “money printing,” “quantitative easing,” or simply “QE”) by another $45 billion a month to a combined $85 billion per month demonstrates an almost complete departure from what a normal person might consider sensible.
To borrow a phrase from Joel Salatin: Folks, this ain’t normal. To this I will add …and it will end badly.
If you had stopped me on the street a few years ago and asked me what I thought would have happened in the stock, bond, foreign currency, and commodity markets on the day the Fed announced an $85 billion per month thin-air money printing program directed at government bonds, I never would have predicted what has actually come to pass.
I would have predicted soaring stock prices on the expectation that all this money would have to end up in the stock market eventually.
Further, I would have expected additional strength in the government bond market, because $85 billion pretty much covers all of the expected new issuance going forward, plus many entities still need to buy U.S. bonds for a variety of fiduciary reasons
Then I would have called for sharply rising commodity markets because nothing correlates quite so well with thin-air money printing as commodities.
That’s what should have happened. But it’s not what we’re seeing.
Eventually this is going to end and it’s going to end badly. Many investors lost their shirts in the last market sell off but this time, if they’re not careful, they’ll lose their pants and that’s where they keep their wallets!
Do Good and Make Money!