In the last four years, we’ve seen the Dow Jones Industrial Average go from 8776 on December 31, 2008 to over 13,000 as of the date of this posting.
Is it a coincidence that global central banks have pumped nearly $7 trillion into the world’s stock markets?
In most recessions or economic downturns, central banks strengthen the economy by lowering interest rates. But when times are so bad that banks won’t lend or borrowers won’t borrow, interest rate lowering simply does not work.
Quoting the New York Times on July 24, 2012:
“in those circumstances, central banks turn to what economists call “quantitative easing’’ — unorthodox methods of pumping money into an economy and working to lower the long-term interest rates that central bankers do not usually control. The most usual approach is large-scale purchases of debt. The effect is the same as printing money in vast quantities, but without ever turning on the printing presses. The Fed buys government or other bonds and writes down that it has done so — what is called “expanding the balance sheet.”
The bank then makes that money available for banks to borrow, thereby expanding the amount of money sloshing around the economy thereby, it hopes, reducing long-term interest rates.”
So, how does the relate to the Dow Jones average? According to Dr. Chris Kacher and Gil Morales (co-Managing Directors of MoKa Investors, LLC and Virtue of Selfish Investing, LLC):
“QE is an effective manner to manipulate the stock market higher, often on anemic volume, creating the illusion of wealth and an improving economy. And since people vote with their portfolio pocketbooks, such investors are more likely to buy stocks in such a stealth bull market environment, creating a further illusion of wealth.”
If the economy were a patient with a brain tumor, the central banks are injecting the patient with morphine to make the patient feel better, but meanwhile, the tumor continues to grow. The price to pay for providing temporary feel good solutions without dealing with the tumor is catastrophic. And, the end result may be disastrous stock market results which is indicative of a disastrous economy.”
We wholeheartedly agree with this assessment. When the house of cards comes falling down, your portfolio will go with it just like it did in 2008.
Learn how you can invest into alternative assets such as income-producing real estate and avoid the catastrophic stock market collapse that is sure to come in the not too distant future. Go to www.IRA123.com and investigate your options.
Safeguard IRA Advisors (www.IRA123.com) is the nationwide, internet division and dba of IRA Wealth LLC, a privately held company headquartered on the West Coast in Lake Oswego, Oregon.
The main focus of the company is the professional set up, maintenance and investment of Self Directed IRA and 401(k) plans for clients who want complete control and investment flexibility within all asset classes, but primarily Real Estate.
Founded in 2005, Safeguard IRA Advisors serves more than 2000 real estate investor clients in all 50 states, and ex-patriot investors in more than a dozen countries.
Contact Safeguard at 877-229-9763 or go to the website at www.IRA123.com.