President Trump: The NEW one and only politics thread

Panic buying / FOMO in US equities happening thanks to the Fed.

Earnings are crashing. Company after company has withdrawn its guidance. Millions of people are getting laid off. 1/3 or more of overindebted consumers can't afford their rents or mortgage payments, let alone afford to buy anything discretionary -- even if they weren't locked in their homes due to a shutdown.

But stocks are rallying back furiously. We are probably at a 20 p/e multiple overall on forward earnings already and it will go higher than that maybe if they can actually reflate their bubble to where it was. Equities are ridiculously expensive by any historical standard.

All because the Federal Reserve is pumping trillions of dollars that it created out of thin air into the debt markets to bailout. ... well, everything. Every zombie company that didn't have any earings before this virus. Survival of the unfittest.

The Fed is somehow buying junk bonds (companies that are at risk of bankruptcy) and parking them at the US Treasury, even though they have no statutory authority to do that. They created a debt-fueled bubble in the first place by expanding their balance sheet to $4.5 trillion by hijacking the treasury and agency debt markets for a decade. They enabled our politicians to bury the country under trillions of dollars of debt. And they created the environment in which many companies were teetering just as a crisis hit -- they are drowning in all of the debt that easy money weighed them down with (for stock buybacks and "unicorn" companies with business models that lose money).

In the past few weeks, they have added close to another $2 trillion to their balance sheet buying up bad debt. Weeks! The Federal Reserve will be the biggest buyer of US Treasuries this year. We are issuing trillions of dollars of bonds to pay for all of the "stimulus." And people have no idea how it works. ... We borrow. And then monetize it immediately by creating dollars out of thin air and buying the debt ourselves with the monopoly money.

Who knew it was this easy? We don't need an economy that produces actual goods and services. All we need to do is create more and more dollars out of the ether and let them chase fewer goods and services.

This notion that blowing asset price bubbles is going to have some kind of wealth effect is going to prove to be incredibly misguided and hurt a lot of people. Their cure is much worse than the disease. Unless all those dollars they are creating are edible, people are going to starve while a couple of Nasdaq stocks with no earnings go to the moon. A really small percentage of the population that has the wealth to chase a bubble will see their paper wealth go up. That is if their attempt at reflating the bubble actually works and it finds legs yet again. We'll find out moving forward.

It's so sad. They are our worst enemy and they have insured years of economic malaise and suffering in a likely stagflation scenario. As bad as that. ... RIP our capital markets. Any vestiges of free market capitalism we had has been replaced by a poliburo led by Jay Powell fixing prices. It's soviet style economics.