Grotesque Mutants

BALTIMORE – Let’s see… U.S. corporate earnings have been going down for three quarters in a row. The median household income is lower than it was 10 years ago. And now JPMorgan Chase has increased its estimated risk of a recession to about one in three.

From the grotesque mutants collection

Image via residentevil.com

These things might make sober investors wonder: Is this a good time to pay some of the highest prices in history for U.S. stocks? Apparently, they don’t think about it…

Last week U.S. stocks rose again, after the Fed announced that it would go easy on “normalizing” interest rates. The Dow rose 156 points on Thursday, putting it in positive territory for 2016.

Dow Jones Industrial Average, daily – boosted by loose Fed talk – click to enlarge.

Hooray! Investors – at least those who passively track the index – are even for the year. And with more central bank fixes, maybe they’ll be able to keep their heads above water for the rest of 2016. Good luck with that!

You may recall our prediction: The Fed will never return to a “normal” interest rate. Why not? Many Wall Street analysts say the Fed’s move to bring interest rates to a more normal level – after seven years of ZIRP (zero-interest-rate policy) – was “too early.”

We think it was too late. The Fed has already distorted too much for too long. Its EZ money policies have created a hothouse of speculation, mistakes, and misallocation of resources.

The financial plants that grew up in that environment – grotesque mutants that require huge doses of liquidity – cannot survive a change of seasons. But these plants are big. And powerful.

Washington… the health care industry… housing… Wall Street… They control the U.S. government, the bureaucracy, and major economic sectors – notably the $1 trillion-a-year security industry.