The Dow Jones rallies past 2007's all-time high, the NASDAQ hits a 12-year high, European stocks are booming and Japanese stocks surge to their highest levels in nearly 50 months… What's going on?
Low interest rates and governments pumping cash into the economy, economist, columnist, radio host and international conference speaker Jerry Robinson reported on his Follow the Money Weekly program.
He said the philosophy follows this pattern:
"Low interest rates and cheap money cause investors to speculate in the financial markets … The financial speculation leads to a rise in stock prices … U.S. investors see their IRAs and 401k balance rising and become more 'confident' in the economic future … This economic confidence translates into more spending which means higher consumption and higher corporate profits … The economy expands and the Fed can stop its intervention."
He said the economy is doing what the Fed expects, but "it has only served to distort the financial markets through wrong incentives and moral hazard."
He continued, "Today, corporations are sitting on enormous piles of cash and are not hiring like they were in the pre-crisis era. U.S. real estate is still plagued with underwater mortgages and record defaults and foreclosures. And America's unemployment remains stubbornly high, despite the government’s best attempts at painting a different picture with their bogus 'official' numbers.
"What does all of this mean to you?
"It means that the stock rally that we are experiencing likely has much more room to continue. Trillions of investment dollars are still sitting on the sidelines in bonds and cash. Americans have short memories. If the stock market continues climbing, money will come pouring into stocks. This will drive prices up even quicker. This will set the stage for the next mega-collapse. "
Tom Cloud also provides the precious metals market update, Jay Peroni comes to the microphone for the investing idea of the week and John Bearss has the Retirement Minute report.
Podcast is 59:09.
Jerry Robinson is an economist, published author, columnist, radio talk show host, and international conference speaker. Robinson has been quoted as an economic authority by USA Today, FoxNews and many other news agencies. His columns have appeared regularly in numerous print and web publications, including WND. In addition, Robinson is also the editor-in-chief of the popular economic newsletter, "Follow the Money Quarterly."