Renewable Revolution

Fri, 04/17/2020 - 13:25

Authored by Lance Roberts via RealInvestmentAdvice.com,

SNIPPET:

Over the last decade, investors have been trained to “buy” the markets every time the Federal Reserve was engaging in providing liquidity to the financial markets. As I noted in “Pavlov’s Dogs:”

“Classical conditioning (also known as Pavlovian or respondent conditioning) refers to a learning procedure in which a potent stimulus (e.g. food) is paired with a previously neutral stimulus (e.g. a bell). What Pavlov discovered is that when the neutral stimulus was introduced, the dogs would begin to salivate in anticipation of the potent stimulus, even though it was not currently present. This learning process results from the psychological ‘pairing’ of the stimuli. Importantly, for conditioning to work, the ‘neutral stimulus,’ when ntroduced, must be followed by the ‘potent stimulus,’ for the ‘pairing’ to be completed.”

Since the financial crisis, there has been very little organic economic growth. Importantly, the rate of growth remained below pre-recessionary highs. The Fed’s zero-interest-rate policies, and expansion of the balance sheet, did little to improve that weakness. In fact, we argue that their incredibly loose monetary policy which fed speculative investments, deterred from economic growth.

"Between the Federal Reserve injecting a massive amount of liquidity into the financial markets, and corporations buying back their own shares, there have been effectively no other real buyers in the market.”

“It is hard for consumers to remain ‘confident,’ and continue spending, when they have lost their source of income. This is why consumer confidence doesn’t ‘go gently into the night,’ but rather ‘screaming into the abyss.'”

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