Of Markets and Men

By R.L. Avery
avery1@mac.com

The stock market continues to reach new highs, every day. There have been five all-time record highs in the past five days as of Veteran’s Day.
It conjures up many thoughts for me, but the one I am most compelled to mention is Alan Greenspan’s comments on “Irrational Exuberance.”
He was speaking in regards to the stock market’s upward trajectory in 1996. Before that decade was over he would throw up his hands and declare it, “ a new paradigm.”
The tech bubble or Nasdaq index would eventually burst but not before rising to unheard of heights, which by the way, it has finally reached again, some 13 years later.
The point is this. This type of human behavior can continue much longer than anyone might make sense of. (Extraordinary Popular Delusion and the Madness of Crowds, by Charles Mackay.)
Alan Greenspan has admitted the Federal Reserve Bank’s role in the housing bubble and I suspect, years from now, Janet Yellen will say something similar in regards to what looks very much like a fed induced stock market bubble now.
Stealing from the poor and giving to the rich. Yes, you read that right. It doesn’t sound right nor does it feel right but I’m afraid that is what’s happening. Janet Yellen held a talk recently on inequality where she expressed her “deep concern.” It boggles the mind really.
She talked about early childhood education, more affordable college tuitions, entrepreneurship, and inheritance. (LOL)
Meanwhile, the reserve bank buys “assets” which are really debt instruments from financial institutions, driving up the price of those assets, which in turn makes those who hold those assets richer.
They then target the stock market to go up. The top 5% of the wealthy own 80% of that, so they get richer.
Interest rates are at near zero punishing those who have saved and not put their money at risk.
The yields on bonds, which the fed keeps buying, continues to shrink and that is one of the reason retirees’ are finding it very difficult to maintain the lifestyle they thought they would be enjoying. Very likely it’s one of the main reasons you are here in Mexico, reading this.
It seems to me Janet has gone and blamed the victim of inequality. If you’re finding yourself poorer, she suggests you spend more on your kids, become an entrepreneur and/or go back in time and have rich parents.

2 comments

  1. I am looking forward to hearing what people say about the column and answering any questions they may have.
    Regards

  2. Likely most cannot go back in time a find wealthy parents, all we can do is spend all our money before we go where our parents have gone before us.

    In the U.S. today, there are two separate economies : the stock market, and the rest of the economy. The stock marked is fueled by the Federal Reserve printing more money and giving it to the banks, and the rest of the economy of the working people, that have lost their jobs , or their jobs have become part time.

    The stock market is now only for the super rich who have a hyper speed Internet to capture and sell stocks before the rest of the investors. Although the Feds have clamped down on this practice, if you want to sell your stocks when the market is crashing, you likely cannot get your broker on the phone. If you buy and sell over the interned, likely there will be a faster Internet connection, where a buyer will see your order, and buy or short the stock before your order goes through ..

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