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January 4, 2017

You Can Have One or The Other - But Not Both (Video)

By EconMatters

We talk about the current shortsighted analysis going around Wall Street circles in this video. This is why most analysts and Market Strategists are idiots and miss almost every substantive directional shift in Financial Markets. They only focus on the benefits of policy initiatives, and fail to properly account for the associated costs. Stocks have done quite well in a cheap money, low growth environment; you really think you get to cherry pick and keep all the benefits of loose monetary policy spurred on by a low growth environment, and at the same time reap all the benefits of a high growth economy?

The last thing market bulls should want is a high growth economy right now, given the low unemployment rate, rising wages and inflation and the $20 Trillion in National Debt overhang. If Trump did in fact run a 6% GDP Growth Rate economy, where do you think interest rates would be going, and at what accelerated pace? Analysts and Market Strategists need to ask themselves this basic question, Do you want cheap money and low growth, or high growth and expensive money? However, you don`t get to have your cake, and eat it too!

That is not how economics work, there are tradeoffs and unintended consequences associated with running a high growth economy, and for stocks these are not good. Let`s see how well these same people love stocks with a 5% Fed Fund`s Rate, you know the "Old Normal" that was thought would never happen again in your lifetime. If higher interest rates and tighter monetary policy is a good thing for stocks why have financial markets sold off hard even at the hint of taking the cheap money punchbowl away?

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Item Reviewed: You Can Have One or The Other - But Not Both (Video) Rating: 5 Reviewed By: EconMatters