The No-Wealth Effect

Why is the Dow over 14,000?

It's no secret the Fed is making Unlimited loans to the Banks at Zero percent and the banks are gambling this money in the Stock Market.

But there's no conspiracy here.  There's no Fed memo ordering the banks to support the Dow.  The banks are buying the Dow for one reason and one reason only.

What's that reason?

Is it that on an absolute value basis the Dow is undervalued?

No.

Is it that they sense "the recovery" is picking up steam?

No.

It's simpler than that.  It's that they know the retail investor is not in the market.  The retail investor is afraid. 

But the banks know that eventually the retail investor will get suckered back into the market.

The Ponzi scheme is good as long as there's a sure fire pool of suckers yet to be lured in.

As soon as the retail investor comes in, the banks know that the Free Trade is over, and they'll sell the market back down to 5000.

And all that money created by the Fed will stay in the banks.

And the retail investor, who funded all that money out of their taxes, will lose all the money they have left - in the market.