> “The consensus seems to be, ‘Don’t worry, the Fed has your back,’ ” Druckenmiller said in his presentation. “There’s one problem with that: our analysis says it’s not true.”
No, investors haven't lost their minds. They are betting that the Fed will backstop the stock markets by any means necessary.
Try this though experiment. Which US companies will not be allowed to fail under any circumstances? You might be surprised to find companies far outside of the banking and national defense industries on this list. Given the chain reaction that often takes place in debt defaults, you might be surprised to find almost every large US company on the list.
That's what the Fed needs to "backstop." The scale is beyond any balance sheet expansion currently being discussed. Of course, this isn't capitalism, either, but that seems to bother fewer people than it should given their rabid espousal of anti-socialist doctrine.
Whatever you calculate the current US national debt to be needs to factor in the market value of those companies that can not fail under any circumstances. Most tallies don't.
Now, try to use any traditional metric of value (P/E ratio, dividend yield) or risk to buy some stocks. You'll quickly throw in the towel and remember that ultimately the Fed has your back. Right?
No, investors haven't lost their minds. They are betting that the Fed will backstop the stock markets by any means necessary.
Try this though experiment. Which US companies will not be allowed to fail under any circumstances? You might be surprised to find companies far outside of the banking and national defense industries on this list. Given the chain reaction that often takes place in debt defaults, you might be surprised to find almost every large US company on the list.
That's what the Fed needs to "backstop." The scale is beyond any balance sheet expansion currently being discussed. Of course, this isn't capitalism, either, but that seems to bother fewer people than it should given their rabid espousal of anti-socialist doctrine.
Whatever you calculate the current US national debt to be needs to factor in the market value of those companies that can not fail under any circumstances. Most tallies don't.
Now, try to use any traditional metric of value (P/E ratio, dividend yield) or risk to buy some stocks. You'll quickly throw in the towel and remember that ultimately the Fed has your back. Right?