Posts Tagged ‘Tech Stocks’

Stock market recovery rests on thin air

November 6, 2013

wile-e-coyoteRight now the stock market is like Wile E Coyote in the Road Runner cartoons.  He can run for a while with nothing supporting him—just so long as he doesn’t look down and realizing he is standing on thin air.

Holders of financial assets have enjoyed a good economic recovery.  But what is holding it up is the Federal Reserve System’s policy of keeping interest rates as close to zero as possible.  If savers and investors can’t earn interest on their bank savings accounts or money market funds, and very little in the Treasury bond market, they have no choice but to venture into the stock market if they want income.

The hope of Ben Bernanke and the governors of the Federal Reserve Board is that the recovery will become self-sustaining, but each time they talk about or start tapering off, the stock market drops.  This hope has not been realized.  Without a recovery in the real economy, the employment of people to produce goods and services, stock price averages are bound to fall back.

Standard & Poor's 500 stock index

Standard & Poor’s 500 stock index

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Click on Here’s The Evidence That The Tech Sector Is In A Massive Bubble for analysis of the stock market bubble by Jim Phillips for Business Insider.  Hat tip to Daniel Brandt.

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