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.
for The Daily Reckoning
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.
The revolutionary new vehicle by Toyota is an exhilarating ride like no other. Stephen Petranek has more on the tiny vehicle that gave him the ride of his life.
When some event - be it a terror attack, financial panic or natural disaster - upsets the status quo, people are more willing to relinquish their freedom in favor of a greater sense of security. And that's when ambitious political leaders make their move... And as Jim Rickards explains, another such event could be right around the corner. Read on...
The stock market doesn’t care what you think. It doesn’t care what anyone thinks. So many people waste their time and energy talking about what the stock market should do, instead of focusing on what the market’s actually doing.
If you’re just tuning in, we’re two parts deep into our three-part conversation with Richard Duncan. Part III continues with talks on globalization, deflation, quantitative easing, the dollar crisis and more. Read on...
If you missed it, we featured Part I of a conversation we had with our friend economist and author Richard Duncan yesterday. Today, Part II of our conversation with Richard Duncan continues. Read on...
Modern anesthesia makes critical operations possible that few humans could survive otherwise. But according to a new study published in the journal Geophysical Research Letters, some of the numbing agents we breathe may also be significant contributors to global warming.