Messed Up Markets

Looking at the Dow Jones Industrial Average, we have reached all time highs. Does anyone feel like this is a recovery?  We have ultra low interest rates, savings rates are down, more people on food stamps, and QE to to infinity across the world.

The real reason why the markets are up is simply because we have all this money printing across the world. Although the velocity of money is not quite picking up just yet because of banks not lending out the money to small businesses, what they are doing is taking this money and bidding up the markets.

The truth is, the real economy has nothing to do with the stock market. Take a look at Japan recently, their monetary policy was to double the money supply. What has happened since? Their stock market went up tremendously, however, with the laws of economics, what goes up, must come down. I"m sure the Japanese Central Bank is terrified on what to do next. If they continue with this kind of monetary policy, the market will continue to go back up after this large increase. (Zimbabwe anyone?)  The currency markets will not be very kind to the Yen.

The current trend in Japan is rising prices, which central bankers tell us, is good for the economy. I guess the Japanese enjoy paying higher prices. After all, its clearly not logical for anyone to be able to want to buy more with their money. Apple announced that they will be hiking their prices, along with many other companies like Tiffany & Co. With so much more money sloshing around in the economy, the velocity of money is beginning to pickup and prices will be bid up much higher in Japan.

Here is the chart of the DOW jones, it had a big reversal at the close yesterday. We will most likely see a fall back down to the 200 day moving average after this big run up in the DOW. Does this trend seem sustainable you?