I spent the bulk of this afternoon trying to find a good topic for this week’s blog post. But, everywhere I looked, it was more of the same. Gold nearing $1, 500/oz? Stocks go up. Bank of America’s earnings blow up? Stocks go up. Google has a massive miss? Stocks go up. Oil back to nearly $110/barrel? Stocks go up. Silver at all-time highs? Stocks go up. Treasury prices rising? Stocks go up. Japan melting down? Stocks go up. MENA in various stages of revolution? Stocks go up. Greece, Ireland, and Portugal all sitting there with forks sticking out of them? Stocks go up.
Too bad you can’t eat a stock, or fuel your car with an IPod II.
I’m told by the TV in my office, the seemingly endless melt-up in stocks is due to great fundamentals, an improving economy, low stock multiples, and zero interest rate policy. Oddly, most pundits (including our Fed Chairman) seem to poo-poo the idea that perhaps $600 billion of quantitative easing (read, money printing) had something to do with all financial assets moving upward in lockstep. Since the Jackson Hole announcement of QE2, the Fed has overseen the printing of over $270 million each trading day. Considering that there are only 6 1/2 hours in a trading day, that boils down to about $42 million per hour. Crazy numbers.
In more “normal” times such numbers would be hard to wrap your head around. But now that we toss around “trillions” when talking about deficits, mere billions or millions seem too inconsequential to be contemplated.
All that aside, I would postulate that the melt-up of every financial asset at the same time may be the impact of $42 million trying to find a home each and every hour. And, sadly, that is why it is so much trouble having a blog during QE2.
It’s important to note that I don’t begrudge a healthy stock market. Heck, a nice tailwind is always refreshing. I do, however, begrudge the price that will need to be paid when the tab for this party is finally handed to us. And I wonder if the Fed’s credit card has enough left on its line of credit to cover the bill.