Agreed. I don't know about you, but my house is paid off. I know I don't deserve any of this pain, because I live within my means. I think there are many tens of millions who don't deserve it. This country needs to get better at making the risk takers and criminals feel the pain, not the millions of Americans who had nothing to do with it.
BTW, different topic, but awhile back you pointed to a rising stock market and told me that the market is a good leading indicator of where the economy was headed. I didn't address that aspect of your post, but I've been thinking about it. I think that your statement was true at some point in the past. However, I think it is less true now. The reason is that with the Fed so actively engaged in QE and Operation Twist, they are having a very large disruptive impact on the stock market. So the predictive power of millions of people buying and selling stocks has lost credibility. You can see it in part by the increased correlation across all stocks. Most sectors seem to move in tandem now. The more highly correlated they are, the more you know the markets are moving not based on pricing mechanisms of the underlying stocks, but on external manipulation or shocks. Right now, the proximate cause is the Fed.
I have no data to back that up, but it's my common sense opinion. The reason why I thought I'd share that with you is because if you are banking your own money on your theory of an economic recovery on the horizon based on stock market increases, then you may be in for some hurt. So I thought I'd share the other side of the opinion with you in case you wanted to be more cautious.
My belief is that the stock market is no longer pricing in accurately the value of the underlying the companies and economy. The free market pricing mechanisms in the stock and bond markets have been deliberately broken by the Fed. That's not opinion. That is fact. Take interest rates on Treasuries in this country. They are set by the Fed and that's why they are low. Look what's happening to Spain and Greece and the other PIIGS. Those interest rates are set by free markets and they have gone stratospheric. That tells you what would happen here in the US to a lesser extent, if our Fed didn't have the power to set interest rates and to print money to manipulate the bond market. Stocks are the flip side of the coin. More QE the higher stock markets go. But it is AIR. It's not real. Therefore, be careful and make sure you separate your politics from your pocketbook. I wouldn't wish stock market losses on you or anyone else. Especially folks like you, who are the entrepreneurs who are the backbone of this country.
Good luck to you. |
