The headlines are screaming at the top of every financial media outlet tonight: The Dow Closes Above 12,000 For The First Time In Two Years!
What’s going on here? Is the recovery well and truly underway? And, if it is, why is the Fed dropping hints again that “QE3 may get discussed” in the future, as Kansas City Fed President Thomas Hoenig said today?
Given the raft of good economic news lately, one might be forgiven for wondering what the Fed has in mind here. Why are they already dropping trial balloons? What are they seeing that we are not seeing, and why won’t they just tell us? What, exactly, is it that justifies more than $100 billion in thin air money each month?
Here’s how member dbworld put it earlier today:
I thought I heard CNBC state the other day that there was seen an inflow into the US Equities market which hasn’t been seen in a while. I didn’t catch the details, but I’m hoping that Chris has a read on this and an explanation on why the US stock market is so strong.
While it’s true that retail investors have only very recently begun moving more money into stock funds than they have been removing, this is focusing on the wrong element in the equation. It does not account for the movements in the stock market over the past several months.
Those moves are best understood by the injection of raw, potent liquidity by the Fed into the system.
