Quote
Originally posted by: DonDiego
The short answer:
What is being performed by the Federal Reserve Bank is market levitation by qualitative easing.
The Fed is buying most of the debt being issued by the US Government, . . . $85-billion per month, . . . to keep interest rates low. Investors, not impressed by 10-year US Bond yields of less than 2%, are turning to the stock market for yield and potential capital gains.
These are not normal market conditions.
Mr. Buffet, as referenced by esteskefauver above, and others wonder what happens when the Fed slows or stops buying the US debt. As things return to "normal" and interest rates rise, . . . will it precipitate a dramatic stock market decline?
As Mr. Buffet says: "Anyone who owns stocks will reevaluate his hand when it happens, and that will happen very quickly." DonDiego says take note of the phrase "very quickly". The stock market is elevated by an unprecedented Government interference in the markets, . . . and not only in the US, but also in Germany and even more so in Japan.
Everybody's investing in stocks to get returns unavailable in bonds or other alternatives, . . . and everybody is hoping to be among the first out of the stock market when things change and the market drops. DonDiego is there too.
And, as Mr. Buffet observes: " . . . the Fed's moves have the ability to cause a lot of inflation." Uh-oh! the worst of both world's, . . . a cratering stock market and rising prices.
Could it happen? Umm, . . DonDiego doesn't know. Didn't the reader pay attention when he said this was all unprecedented?
If the reader wants to investigate beyond the misinformation likely to be found on the internets' fora, . . . DonDiego suggests starting with the topics of Keynesian Economics vs Austrian School Economics.
Thank you for the well informed response. I just don't see myself ever putting any money into the stock market. I know the state of Florida is doing it with my pension in a round about way but as far as the money I accumulated on my own I just can't see me ever jumping into the market. I really believe that in this day and age it is crooked and too easy to manipulate by the big fish. I saw Jim Cramer talking about how he used to falsely drive up the price of a stock and how easy it was to do this. It turned my stomach. Don't these people realize that for many this is their clients life savings.
