investors put capital to work, they’re buying future returns in – you guessed it – dollars. So with this in mind, the notion that market fiddling meant to devalue the currency would actually boost equity returns brings new meaning to absurd. Some offer the empty and trite rationale of “don’t fight the Fed”: the central bank wants a strong market, and it will get it because it’s, well, the Fed. It all sounds so compelling until we remember that the Fed aggressively cut rates in 2001 only for the Nasdaq, S&P, and Dow Jones Industrial Average to collapse anyway. The Fed can’t alter reality, and in the early part of the 21st century, investor sentiment turned bearish. The Fed similarly slashed rates in 2007 and 2008 to stem a falling market, only for stocks to fall further. In 2015, the Fed began a series of rate hikes that took place over several years, only for U.S. shares to rally. After that, it’s worth bringing up the obvious question: Why on earth would market interventions by inept central bankers actually instigate the upward direction of the deepest, most informed markets in the world? To believe the Fed narrative (basically a variation of Barack Obama’s errant “you didn’t build that” line: stock market edition), one would have to believe that the 20th century, when economic planning from the Commanding Heights was thoroughly discredited, never actually happened. It’s not a serious approach to market or economic analysis.
wise central bankers, stock markets are brutally honest sources of bright light that constantly expose the corporations that aren’t delivering for shareholders. To offer up but one of many examples, ExxonMobil (XOM) was the world’s most valuable company in 2008 with a market cap of $492 billion. Its valuation has halved since then and fallen all the way to $58 billion in 2020. GE? While it could claim the world’s highest valuation of $585 billion when the 21st century dawned, at $116 billion it’s now literally a fraction of its former self. After that, it’s worth bringing up the obvious question: Why on earth would market interventions by inept central bankers actually instigate the upward direction of the deepest, most informed markets in the world? If the Fed could render markets artificial with its vain rate machinations, logically prices would remain artificially high across the board, and without regard to their existing and future prospects. But long-term shareholders of GE and XOM know differently. Stock markets are harsh truth-tellers... To see why, it’s very useful to once again travel back in time to when the 21st century began. Only this time, rather than focus on the high- flyers, we will turn our eyes to corporations that were largely dismissed back then as
THE TRUTH-TELLING MARKET As opposed to rigged playthings for allegedly
American Consequences
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