A Crash Course in Money (Part V) |.
Last Thursday, the Dow shot up 421 points, or 2.4%, following the Fed’s announcement that it would be “patient” about normalizing interest rates. It was the biggest single-day gain for the Dow in three years. And the 13th biggest single-day gain ever.
No one knows what was in this package – probably not even the Fed – but speculators thought it had a ribbon and bow on it. On Friday, they drove the Dow up another 27 points for good measure.
We have our doubts about Santa. Does he really exist? Or is it just a myth we tell children, mental defectives and stock market investors?
A stock is a share in a business. Why would a business be more valuable because the Fed tells the world it is in no hurry to stop torturing interest rates? We knew that already. And it shouldn’t improve the real worth of your business anyway.
Just the contrary: It will more likely depress the value of businesses. The more the central banks distort key price signals, the more your business is prone to make bad investment decisions.
