Did the Fed “Buy Itself a Landslide?”

“Dear Jack:  Don’t buy a single vote more than is necessary. I’ll be damned if I’m going to pay for a landslide.”

—JFK quoting a made-up telegram from his father, Joseph Kennedy, after he first won election to Congress.

As far as I’m concerned — and I know a lot of other veteran investors feel likewise — there are only three real questions about today’s stock market:

#1.  How much longer can the Federal Reserve promote high stock prices, by keeping interest rates at 0%?

Make that, zero percent interest for Wall Street; large corporate borrowers (who least need the money); and banks paying millions of savers — many of whom are retirees living on the income from their savings.

#2.  How much longer is the Fed willing to play the role of stock market siren (cheerleader, if you prefer)?

#3.  What happens when the Fed stops playing that role — or equivalently, Fed stimulus stops working?

Stock Market Skeptic

I’ll be a lot less skeptical about today’s asset valuations when the Fed resumes its more-typical role on the sidelines, vs. its current role as (dominant) market maker and player in today’s bond and — at least indirectly — equity markets.

P.S.  The Fed’s announced policy of gradual tapering doesn’t really count, because everyone know the Fed will jettison that at the first sign of serious trouble and go back to double-barreled stimulus.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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