MAR 29, 2018
The stock market has gone on its precipitous run for one basic reason: The Fed. And not in some theoretical, “Well, investors behaved a certain way because of certain Fed policy decisions” way.
The Fed printed money, handed it to corporations at near zero interest, and those corporations used that money to buy their own stock on the open market. You saw a surge of price-insensitive demand for a fixed amount of shares of stock, financed by the printing-press Fed fiat infusion.
I want to break down the situation in the clearest terms possible so that there are no misconceptions here. The bottom line is this — the Federal Reserve through monetary stimulus packages and near-zero interest rates engineered an artificial economic recovery from thin air. But, just as they print money from thin air, everything the central banks create has fleeting value and will eventually crumble.
The Fed not only pumped trillions of fiat dollars into banks and corporations, they also purchased over $4 trillion (officially) in various assets. These purchases coincided with interest rates so low that loans through the Fed were essentially free for corporate borrowers. But what did corporations do with these loans?
Well, they poured that cash into their OWN stocks, of course. They did this through something called “stock buybacks” which is basically a legal form of stock market manipulation.
Companies purchase their own stocks and reduce the number of stocks circulating on the market, thereby elevating the value of the remaining stocks and pushing the Dow to new highs every year… until this year, that is.
ORIGINAL SOURCE: The Real Reason Why Stock Markets Will Continue To Crumble This Year by Branon Smith at Alt Market on 3/28/18