Ben Bernanke: Thanks for All The Bubbles

The Federal Reserve Open Market Committee (FOMC) statement that it will keep interest rates near zero until mid-2013 basically will create a bubble in everything except U.S. dollars.   Where will you see bubbles?  Stocks, gold, bonds, Asian currencies, commodities, Swiss Francs, old cars, collectibles, worn-out shoes, sand, you name it and the number of dollars it takes to buy it will be higher.  Greenspan helped create the housing bubble that recently popped, we might even see houses and mortgages come back too. 

How does it all end?  It's two to ten years away but it won't be pretty.   We'll need another Paul Volcker-style Fed to stop the bubble.  He did it in the early 80's and while it helped the dollar, and stopped high inflation, it was brutal on the economy and employment.

To be fair to the FOMC today, they probably thought they had to keep the printing presses going to counteract the fiscal mess made by the last 10 years of deficit spending cum impass in Washington.

What am I doing in the market?  I spent the last hour Monday buying into selling caused by an across-the-board overreaction.   I had to put my money where my mouth was.  After all, I'd been on TV that morning telling everyone not to worry about the U.S. debt downgrade by S & P.  

Today, I was running around my watch list of companies I like, but previously thought were too expensive to buy.  I was thoughtfully placing limit orders below the market.  A few of my orders were filled at great prices.  Then, when the Fed announced that they had decided to keep interest rates low and continue to print money for the next two years, I said, "Thanks, Ben" and bought stocks.  I actually went into a buying panic along with the rest of the market.   After all, I have to make and save up some money to pay for the day when this circus ends.

What am I doing the rest of this week?  I'd be happy to trade my dollars in for sand, old shoes, and collectibles, but I prefer to buy legal title to tiny pieces (i.e. - stock) of big businesses (i.e. multinationals) that make products people want and will always want (i.e. toothpaste, trees, trash collection, toilet paper, fuel, packaged food, and diapers).   Unlike gold, collectibles, and used cars, good companies pay dividends while they grow with inflation.  Watch my updates on kapitall.com for the list. 

I also might refinance my mortgage.  Lord knows, the bank will have loads of newly printed money sitting around.  All I have to do is convince them I'm still a good credit risk.

Comments

[Consumer Advocate]

Don't thank The Bernanke yet. I am sure he is not done with giving.