04-17-2020, 08:41 AM
My takeaway from the Dow Jones going up more lately than down is that this is a product of the Fed pumping almost free money into the banking system, and buying up all kinds of governments and corporate bonds.
The proceeds from these practically free loans and straight bailouts are being pumped back into the stock market to buy stocks at perceived low prices that drive the stock market up. You buy stocks low and sell them a bit higher, and you can easily pay the banks back because the yield you make on the stock sales is far greater than the cost of paying back the bank. IOW, the stock market is being held up artificially by absurd Fed actions that prevent the financial markets from doing their jobs of forecasting future economic realities.
I'm I misguided in my assumption here? Please correct me if I'm wrong, but 15% unemployment and depression forecasts should not give us a stock market going up in value, especially considering the gigantic changes the economy is going to convulse through and evolve into over the next year or more, regardless of what governments do or don't do to manage the pandemic.
The proceeds from these practically free loans and straight bailouts are being pumped back into the stock market to buy stocks at perceived low prices that drive the stock market up. You buy stocks low and sell them a bit higher, and you can easily pay the banks back because the yield you make on the stock sales is far greater than the cost of paying back the bank. IOW, the stock market is being held up artificially by absurd Fed actions that prevent the financial markets from doing their jobs of forecasting future economic realities.
I'm I misguided in my assumption here? Please correct me if I'm wrong, but 15% unemployment and depression forecasts should not give us a stock market going up in value, especially considering the gigantic changes the economy is going to convulse through and evolve into over the next year or more, regardless of what governments do or don't do to manage the pandemic.