Saturday, February 2, 2013
Stocks Will Go Higher if We Keep Printing Money
Today the Dow surpassed $14,000. The crowd cheers. The Fed is buying $85 billion a month, about what the US fiscal deficit is, so then stock prices do and will continue to go up.
But, the cheering actually means nothing.... As Kyle Bass says, "Zimbabwe's stock market was the best performer this decade - but your entire portfolio now buys you 3 eggs."
Is there any wonder as to what is going to happen in the USA?
Please refer to Zerohedge and Kyle Bass Tells 'Nominal' Stock Market Cheerleaders: Remember Zimbabwe
Amid the euphoria of today's crossing of the Dow's Maginot Line at 14,000, Kyle Bass provided a few minutes of sanity this morning in an interview with CNBC's Gary Kaminsky. Bass starts by reflecting on the ongoing (and escalating) money-printing (or balance sheet expansion as we noted here) as the driver of stock movements currently and would not be surprised to see them move higher still (given the ongoing printing expected). However, he caveats that nominally bullish statement with a critical point, "Zimbabwe's stock market was the best performer this decade - but your entire portfolio now buys you 3 eggs" as purchasing power is crushed.
Now Japan's stock market has been climbing higher and higher in the last two months also. The Japanese government has been printing and printing.The currency war has begun and we (the people) will be the losers.
Is there any wonder as to what is going to happen in Japan?
For the Keynesians out there who think this is good fiscal policy, then let me ask the tried and true question, "If government's can create wealth just by printing money, then why are there still poor and starving people in the world?"
The answer is obvious; you cannot fix a debt problem by creation of more debt.
PS: The Japanese stock market has gone way up in January 2013, right? WRONG! It has flatlined against the US dollar:
How Much Has the Japanese Stock Market Risen in January 2013?
There is a rising roar of bulls stampeding to the Japanese stock market. Whether due to Abe's apparent "this time it's different" cratering of the JPY to aid exports (and avoid deflation) or just plain old momentum (as the Nikkei 225 is nominally up almost 8% in January). However, just a little reminder that this return is priced in those increasing worth-less JPY. For all those exuberant overseas investors eying the gains, the reality is that, in USD, Japan's stock market is almost perfectly unchanged since 12/28
Great work, Abe... Deeper in debt and nothing to show for it except the destruction of the purchasing power of the yen.