The Great Devaluation

5Free Willy

Free money has changed the way all investors invest. At one time it made sense for investors to have a balanced portfolio that held stocks and bonds. The stocks offered growth with dividend income. The bonds offered diversification, protection, and a guaranteed income stream. Since the creation of QE, investor mindset has radically transitioned to “nothing pays a meaningful dividend and therefore everything is about growth,” even including assets that are supposed to be considered the safest investments.” The strategy for even the smallest investors has been to buy up the stocks of major corporations who buy back their shares and catch a ride on the free money train.

The distortions of the Federal Reserve have changed the fundamentals of even the safest asset classes. The only way to win as an investor has been to play the game. If you can't beat them, join them.

With everyone playing the same stock buyback game, investing is no longer about capitalism and building the best companies. Capitalism has become about having access to free money. So now the only thing for investors to do is to buy the stocks of every company. The system now ensures that everyone will win. Index investing is the rage. In fact, the more discerning investors have been punished. The risk-taking cowboys have been incentivized more than ever to take on more risk. The only way to win is to join the risk frenzy and buy. Who cares if it's safe?

Treasuries have long been considered the safest asset ...