*DonDiego has no significant disagreement with jatki99's and Roulette Man's comments above.
*And DonDiego does not present the following as a partisan political argument for/or against anyone. It's just an opinion shared among some economic writers and DonDiego.
The U.S. economy is in somewhat unchartered waters at this time.
The Federal Reserve has become the buyer-of-last resort for US Government bonds explicitly to keep interest rates low to encourage borrowing and investment and hiring, . . . f'rinstace, effectively buying pretty-near the entire US deficit for the year 2013.
And, indeed, interest rate
are low. But borrowing and investment and hiring are not booming as expected.
Nonetheless, the Federal Reserve actions do have effects.
__Some borrowing has been encouraged; specifically historically low mortgage-rates have resulted in some home-buying and lots of refinancing. [DonDiego's rate is presently under 3%.]
However, right now mortgage finance applications are dropping, . . . and home construction/sales may be about to follow.
__The greatest effect of the low interest-rates has been to draw investment away from low-interest bonds and into more speculative investments, particularly stocks, which have, indeed, provided higher returns than bonds.
This has contributed somewhat to the well documented income inequality; risk-averse little folks who cannot afford to lose what they've got receive tiny interest on their savings accounts and bonds while the well-off shift into stocks and increase their wealth.
So the big money has gone into stocks and stocks rose.
So it would seem quasi-governmental economic policies, as opposed to economic fundamentals of US corporations may have been the driver of the stock market.
The question now is: How long will the Federal Reserve continue to purchase US bonds at an unprecedented rate and keep interest rates low? And what happens if/when they stop?
Well, the Federal Reserve just announced they'd "taper" from buying $85-billion-per-month to
only $75-billion-per month. But with the proviso that they can resume the higher rate if/as needed.
DonDiego has been fully-invested in the stock market since the later-half of 2009.
He supposes he will be taking some profits and cutting back some in the near future; . . . maybe hopin' fer one last pop before he sells.
DISCLAIMER:
DonDiego has no responsibility to anyone who takes any action based upon anything which DonDiego writes, . . . ever.
