An analysis on the S&P500 and money printing
To most in the financial industry, the stock market has completely recovered and made new highs. However, this is unfortunately not the case at all. A large portion of the recovery in the stock market has been caused by the federal reserve printing the most money they've printed in US history. We are, overall, down since the highs of March. So when you think your portfolio is doing extremely well, maybe give it a second look.
What does this mean for the economy as a whole? Essentially it boils down the term "bailout". If we consider what happens when the federal reserve starts printing and then buying assets like mad, we get inflation. This is the general answer that most think of. However it really is much more than that. If the FED were to print lots of dollars and give every US citizen $10,000 we would see inflation that would equally affect the population. However, when the FED inflates by buying stocks the inflation then becomes a bailout, as the FED is now choosing winners and losers. The stock holders being the winners (a minority of the population), and the rest of the population the losers. People who don't benefit from the stock price increase in USD terms are much more affected by the inflation.
This goes hand in hand with what we have seen since March, a very fast concentration of wealth.
Of course we should think about this, and realize that the federal reserve is a private bank that is effectively giving a bailout at the expense of the American people. But I cannot change that policy here today. But what I can offer you is an instrument to see what's happening on the chart, and get a better idea of what the assets are really doing when you account for this massive printing that's going on.
You can find the indicator I've used in this chart on my tv profile.
What does this mean for the economy as a whole? Essentially it boils down the term "bailout". If we consider what happens when the federal reserve starts printing and then buying assets like mad, we get inflation. This is the general answer that most think of. However it really is much more than that. If the FED were to print lots of dollars and give every US citizen $10,000 we would see inflation that would equally affect the population. However, when the FED inflates by buying stocks the inflation then becomes a bailout, as the FED is now choosing winners and losers. The stock holders being the winners (a minority of the population), and the rest of the population the losers. People who don't benefit from the stock price increase in USD terms are much more affected by the inflation.
This goes hand in hand with what we have seen since March, a very fast concentration of wealth.
Of course we should think about this, and realize that the federal reserve is a private bank that is effectively giving a bailout at the expense of the American people. But I cannot change that policy here today. But what I can offer you is an instrument to see what's happening on the chart, and get a better idea of what the assets are really doing when you account for this massive printing that's going on.
You can find the indicator I've used in this chart on my tv profile.
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