Why It Doesn't Matter if Americans Aren't Happy, Just Ride Stock Prices Higher
By George Leong
Yesterday, the S&P 500 closed at 1,690, not far from its current 1,697 record-high, and the index may soon test and break 1,700, creating yet another new record. But despite all of this wealth created by the bulls charging in the stock market, there appears to be some dissent among Americans. Why is this?
According to an NBC News/Wall Street Journal poll, about 61% of Americans feel the country is on the wrong path, with only 29% saying the government is delivering.
Since late December, the number of those believing the country is steering the wrong course has risen while those who say everything is fine has declined from 53%. (Source: Harwood, J., “Most Americans say nation is headed off track: NBC-WSJ poll,” CNBC, July 24, 2013.) The irony is that during the same period, the Federal Reserve has pumped more money into the economy, stocks have boomed, home prices and the housing market have rallied, and more jobs are being generated.
So what the heck is going on, and why aren’t we happy?
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What’s going on is clear in my mind—as many of my readers will know. The reality is that, yes, we are making money in stocks—in fact, it’s been pretty easy money to make. The Federal Reserve has provided us with free money to essentially spend and spend and not save. With bonds and income instruments yielding so little, why would you want to move out of the stock market?
The problem is that there are many Americans, probably a vast majority, who are just struggling to get by and pay the bills. These folks are not thinking about investing in stocks.
And many of you who are making money likely realize that the national debt that the government and Federal Reserve is amassing is horrifying, and that we’re burdening our future generations with it. I have discussed this in the past, especially noting that the higher interest rates to come will hurt even more than the ones now. The Federal Reserve knows this but doesn’t know what to do. Look at what happened with Detroit.
The bankruptcy in Detroit is a good example of why the Federal Reserve needs to rein in some of its bond buying and begin the process of getting the country’s people and companies off their monetary addiction.
You wouldn’t give a heroin addict more heroin, would you? So why would you continue to give the country more money? Ask the Federal Reserve.
And while the unemployment rate is quoted at 7.6%, we all know that the actual number of those without jobs or working at jobs beneath their skill level is much larger—and these people aren’t happy. The Federal Reserve just can’t keep on printing money.
The discontent will continue to be high until the government and Federal Reserve really look at the situation and come up with a more effective solution that will help everyone—not just those with money.
In the mean time, the rest of us can continue to ride the stock market.
This article Why It Doesn’t Matter if Americans Aren’t Happy, Just Ride Stock Prices Higher was originally published at Investment Contrarians
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