Joel Bowman

Chavez is dead. Now that we’ve wasted three words on his obituary, let’s move to other news…

The Dow hit a new record yesterday. 14253.77 was the high water mark at the close…and the tide was still rising this morning. Surely this is good news, right?

We’ll answer our own question, emphatically: Yes and No.

Sorry to seem like a fence-sitter here, Fellow Reckoner…but facts matter. And all the facts aren’t quite in yet. The run up in stocks has been just one of the effects of Bernanke’s loose monetary policy. As readers of these pages well know, the Fed Head has pinned interest rates to the floor, forcing savers out of traditionally secure investments and into the go-go world of high risk speculation.

Everybody is in the pool, in other words. No wonder the water is rising!

Markets may indeed be “deep and liquid,” but that’s merely an assessment of quantity, not quality. In other words, it’s tough to tell whether stocks are rising because of strong economic fundamentals…or because a bunch of chubby tourists piled into the shallow end.

Moreover, records only really matter when you have a reliable unit of measurement in which to calibrate them. Stocks are most commonly measured in dollars. But is a dollar a reliable unit of measurement? Bernanke and his fiddlesome antecessors at the Fed were charged with maintaining the greenback’s integrity. They’ve been on the job for an entire century. And yet, weighed against gold, the once-mighty buck has lost roughly 97% of its value. And now stocks, measured in shrinking dollars, are proclaimed to be at an all-time high. And the Feds get the credit! What kind of Procrustean scam is this?

It’s as if, while enduring rampant hyperinflation, Zimbabwean businesses were to gloat about “record profits” because they sold a loaf of bread for a million Zimbabwean dollars. Never mind that it took a trillion of them to buy a roll of toilet paper, a fact that probably inspired more than a few people to simply cut the middleman out altogether, giving their single-ply currency the treatment it sorely deserved.

Or, to switch metaphors, it’s easy to declare yourself a giant when you shave 97% off the value of a meter. Measurements matter, in other words.

Tellingly, US stocks are NOT at an all-time high in terms of gold…or oil…or virtually any other commodity of real world value. They are, however, at an all-time low…adjusted for bitcoin.

In the end, there’s no problem so bad that a Central Planning committee can’t get together and make it still worse. These are the men and women who arrive at the construction site with a wrecking ball, and promptly get to work.

Joel Bowman
for The Daily Reckoning

Joel Bowman

Joel Bowman is a contributor to The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.

Recent Articles

A Simple Strategy for Investing in the US Energy Boom

Byron King

Too often investments are made in a vacuum. But as Byron King demonstrates, the global economic crash... easy money... and technological advancements are all interdependent. In particular, that connection has changed the investment calculus in the resource market. Read on to learn how...


The Traffic Jam That Kills Thousands of People Every Day

Juan Enriquez

Back in the 1980s, John Nestor became infamous for single-handedly causing massive traffic jams on the Capital Beltway. But in his professional life, he created a completely different kind of traffic jam... one that may have contributed to the deaths of thousands of innocent people. Juan Enriquez has the full story. Read on...


Laissez Faire
New and Unexpected Ways to Fund Long-Term Care Expenses

Jamie Hopkins

Too many people think that long-term care planning is just a decision about whether to purchase long-term care insurance. However, long-term care planning is so much more... It is a discussion about how you will fund this expense, where you will receive long-term care, and who will provide the care. Jamie Hopkins explains...


Beware the Barrage of New Tech IPOs

Greg Guenthner

Lately, the market seems to be obsessed with new tech darlings with flashy names and exciting stories. But there are more sinister forces at work... Today Greg Guenthner explains why you should pay no attention to the man behind the curtain, and avoid being tempted by big name tech IPOs. Read on...


5 Min. Forecast
The 2 Forces Driving the Current Stock Market Boom

Dave Gonigam

Stocks have started off this week pretty flat. But is more volatility to come as the week progresses? Today, Dave Gonigam takes a look at a few scenarios for the rest of this week, and for 2014 as a whole - specifically relaying what one analyst sees as the two main forces currently driving the market boom. Read on...