Wednesday, January 15, 2014

Broad US Stock Index Loses Touch With Reality In 2014

Just look at the insane record high the S&P 500 reached today.  The narrative that bank earnings drove this record doesn't hold water in light of recent regulatory gifts banks received.  Banks that don't have to hold larger capital cushions are free to stay levered up in pursuit of the Fed/Treasury carry trade.

The PPI's rise indicates inflationary pressure at early points in the nation's supply chain.  Come on, people, that's obvious even to Notre Dame preppies running their family's trust funds.   Those higher prices may work their way into the CPI but don't count on it if government economists change their seasonal smoothing methods.  Telling the straight truth would be so much easier if it didn't jeopardize people's careers.  Politicians can't tell us the truth about unfunded entitlements and declining median incomes but Americans don't mind as long as their EBT cards are reloaded each month.

I've said it before and I'll say it again.  The Fed and other central banks are playing games with the cost of capital and the retirement savings of middle-class investors.  This is not a fun game.  It will end very badly and a lot of people will be hurt.  Consider the period between the two World Wars for case studies in how badly people can be hurt.  The combination of the Great Depression and an unequal wealth distribution skewed toward plutocrats helped destroy the immature democratic institutions of Japan and Germany.  America's institutions are of course more mature but our plutocrats are less capable of governing now than at any time in our history.

Alrighty, that's enough of a rant for now.