If You Believe That...

April 13, 2015
Yes, Worry About the Stock Market

"There is nothing more deflationary than creating a phony asset bubble, having a bunch of investors plow into it and then having it pop."

If you believe that...

Druckenmiller's message is that the economic backdrop doesn't justify the Federal Reserve keeping borrowing costs near zero, and that its policies are forcing investors to take on extra risk to boost returns.

...then you cannot believe this.

The Fed is "forcing" nothing. Investors always have a choice. The correct word is "tricking".

Stock market investors who believe that 20% annual returns are now the new normal must think that the Great Recession and the Fed have magically transformed our economy into a supercharged prosperity generating machine. Should that "too good to be true" theory really pass any rational investor's smell test?

This is not investment advice.