Bernanke & the Bull Market (Excerpt)

Fed Chairman Ben Bernanke on numerous occasions explicitly stated that his ultra-easy monetary policies were aimed at boosting stock prices, resulting in a positive wealth effect on consumer spending. Stock and real estate prices are rising amid some concerns that the Fed is doing it again, i.e., pumping air into asset bubbles.

The market capitalization of the Wilshire 5000 is up $9.2 trillion since March 9, 2009, to $16.0 trillion on Friday. The Fed’s flow of funds data show that the value of all stocks in the US has increased by $12 trillion to $26 trillion from Q1-2009 through Q3-2012. The value of stocks directly held by individuals is up $4.7 trillion to $9.8 trillion over this period. The values of equity mutual funds and equity ETFs are up $2.3 trillion and $634.7 billion, respectively, over this period.

Owners’ equity in household real estate jumped 19.6% by $1.3 trillion to $7.7 trillion during the three quarters through Q3-2012! There’s more to come given that the median existing home price rose 10.9% y/y during December, the best pace since January 2006.

Today's Morning Brief: Bernanke’s Check List. (1) Give the credit guy credit. (2) Obama picked the bottom. (3) Fed fed the bull. (4) Ben’s missions accomplished and unaccomplished. (5) Is the big wealth effect just an illusion? (6) Cranking up the asset-inflation machine. (7) Stein’s “overheating mechanism.” (8) Evans: QE could stop before 7% jobless rate. (9) Cleveland’s concerns. (10) Global positives. (11) “Side Effects” (+ +). (More for subscribers.)