Dow At Record High, U.S. Federal Reserve Still Worried About Inflation

The Dow is at a new record high. But as much as the Dow has gone up, earnings have gone up more. So many commentators believe American stocks are a bargain and surely, some are.

But what could lie ahead?

Analysts have been focused on the hydraulics of the system. So much new liquidity is coming into the markets, they say, prices have to go up. What can an investor do but buy investments?

The Wall Street Journal reports that even the United States Federal Reserve thinks the economy will keep expanding, but is not sure that inflation is under control. That could mean rate cuts aren’t in store. But then again, they’ve said that before… and cut.

We are not capable of predicting price movements. We’ve proven that point to our satisfaction on a number of occasions. All we can do is to marvel at the spectacle of it… and try to guess what will happen next.

Our guess is that the system will bubble along for a while longer. For the present, there is a lot of cash around. And people, generally, have never been more confident. Last week brought news, for example, that the risk premium on junk bonds has fallen to its lowest level ever. Now, investors are so confident that they will buy junk bonds, rather then treasuries, and ask only 2.42% more in annual interest.

But we remind readers; we do not invest our money on this kind of guesswork. When we invest, we want decent odds that we’ll end up with enough of a gain to offset the risk. But since, so many markets are so high, and there are so many geniuses taking so many chances with so much money, we judge the odds at less than even.

No, in our opinion this is not the time to take big risks in the public markets. So, we buy gold… keep our Crash Alert flag flying over company headquarters… and hold onto our hats.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Leave a Reply

Be the First to Comment!

Notify of
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to