QE4 And Dow At 25,000

Cannons to the left. Cannons to the right. And a fool on every corner.

It will become more and more dangerous, we predict. Then in a fiery ball of hyperinflation and bombastic imbecility, it will all be over…

If we’re lucky.

Then we will return to sanity – older, wiser… and much poorer.

Nuts to Lend at Zero

But that won’t happen in a day. Or a week. Or even a year.

Yesterday, the stock market bounce that began at the end of last week reversed course.

The Dow (DIA) closed down 114 points. This left the U.S. stock market with its worst monthly performance in five years.

This alone is meaningless. Markets go up and down. Nothing new there.

But this is a very special market. The very special policies of the Fed, and other major global central banks, have been made especially dangerous.

Whoever heard of lending money for zero interest? Are they mad? Does capital have no value at all? Is there no longer any virtue in saving money?

Yes, it is nuts to lend at zero. But the Fed has been keeping its key lending rate near the zero bound for the past 80 months.

And when you lend money for nothing, you have to expect that other things will become a little nutty too.

And so they have.

As President Reagan’s budget adviser and outspoken Wall Street critic David Stockman points out, not a penny of this EZ money has gone to the real economy.

Instead, it has all ended up encrusted to the bottom of Wall Street’s yachts.

Total outstanding household debt is 3% lower today than it was in the first quarter of 2008 – on the eve of the global financial crisis.

Instead, the impact of all that free money has gone to corporations, as money managers and individual investors “reach for yield” in the stock market.

That is to say, it’s gone to the cronies and the zombies

The Weakest Link

We (sunny optimists that we are) might readily believe that U.S. corporations used this loot to build new factories, hire new people, develop new products, and deliver new and better services.Wrong.