Tuesday, August 28, 2012

Is the Stock Market Broken?

We know the economy is in rough shape, contrary to official proclamations of "recovery", but I think this snapshot of the financial headlines from MSN money this morning pretty much sums it up:

Investors don't know what to do until the Fed speaks.

This is not how capital markets are supposed to work, yet here we are. Rather than investors pooling their money into companies with the best business prospects and providing healthy economic growth, they sit on the sidelines waiting to see how to make the next "play" on the Fed's statements.

Why the stock market is broken

And if you needed any further proof that government meddling in the economy was bad, check out the next headline:

Global stock rally stalls on stimulus doubts

Again, investors are not deploying their capital in constructive and meaningful ways, but rather waiting to see if they'll get more free candy from the central banks.

Investors and the banking cartel are addicted to stimulus, but stimulus isn't free. It will be repaid either through higher taxes, or more likely higher inflation which will make everyone poorer. And the end result is mal-investment of capital. Companies that should be receiving investment capital to actually produce needed services or products are being crowded out by investors looking to cash in on "stimulus."

This is not healthy and will not end nicely.

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