The Great Con of the Recovery: The Stock Wealth Effect

04-23-2011 • ZeroHedge.com

We now have only one line of support left (the 2008 low) before the greenback breaks into uncharted territory, triggering the long-term Head and Shoulders pattern that everyone is aware of and which forecasts a 50% devaluation in the coming years. Stepping back from this, you really can’t help but notice how stupid the whole “stock wealth effect” ideology is. Setting aside the fact that MOST of the gains stocks have produced since 2009 are due to US Dollar devaluation, it strikes me as odd that someone would think they were richer because their stock portfolio was up… while the cost of just about everything has ALSO gone up tremendously. Since March 2009, stocks have doubled. However, oil has nearly TRIPLED in price. In order for people to actually make money with stocks, they have to SELL the stocks. Agricultural commodities have nearly doubled in value too. In fact, the only thing that HASN’T gone up is home prices and incomes. So the idea that you’ve made money by owning stocks since 2009 is a little hard to swallow as all those paper gains are eaten up by the higher cost of living. On top of this, in order for you to MAKE money with stocks you have to SELL the stocks. So technically, all the money the “buy and hold” crowd has made going long since 2009 remains paper gains until they cash out. And when they do cash out… they’re cashing out into… US Dollars… which continue to drop like a stone. Has the Fed really succeeded in generating wealth for anyone?