Thought Experiment

The common theme out there is that the Fed is trying to create a wealth effect with its monetary policy. The wealthier we are the more we spend. I think that's safe to say.

Investors of the past made money in bonds. They also made money in stocks. Right?

If the Fed comes in and buys up bonds then that forces interest rates down. Right?

If interest rates on bonds are driven down then at some point investors can no longer get wealthy owning bonds though. Nobody's getting rich off of a -0.74% 10-year TIPS held to maturity. Right?

That would mean that the Fed has put a stop to any wealth building that bonds once did. Right?

If the Fed has removed one of the two most obvious ways for investors to get wealthy then perhaps someone can tell me how this is supposed to create a permanent wealth effect.

Oh, wait. I remember. Never mind.

It's all about inspiring confidence. What have confident investors been doing for the past few years? Doubled their money! That's what. It's a sure thing (again). Can't lose (again). No doubt about it. That's the one thing we can always count on. The stock market only goes up.

Let's look at this another way.

The Fed bought Investment A (bonds) but not Investment B (stocks). Clearly everyone needs to pile into Investment B then. That's just common sense.

Forehead. Desk. Whack. Whack. Whack.

As always, just opinions of course.