Profits Trump People

This is what it looks like when profits trump people:

I imagine that this is the recipe by which capitalism might ultimately kill itself.

Chart from Zero Hedge.

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  1. December 13, 2013 at 3:42 pm

    Pretty much says it all, doesn’t it? They had another one (NYSE total market cap = 5 times fed balance sheet) which was equally damning.

  2. December 13, 2013 at 3:47 pm
  3. December 16, 2013 at 10:57 am

    Wow, thanks for posting that, Steve. The chart with QE stripped out of the S&P is indeed astonishing. I guess the question that will be determined with time is whether is it valid or invalid to “strip out” the effects of QE when trying gauge future prices. I tend to side with those who believe that if/when “flow” stops, there will be insufficient buying power to support current prices. But I suppose only time will tell…

    • December 16, 2013 at 12:36 pm

      Maybe the way to look at it is thusly: prior to 2007 when credit markets froze there was one relationship between the Fed balance sheet and demand for risky assets. After the sub-prime implosion a huge segment of ‘AAA’ assets vanished into thin air, no longer eligible as collateral – hence the massive drop to a ‘new normal’ of Fed balance sheet leverage.

      Maybe the point is that a wide range of investors / institutions had access to marginable collateral and leverage prior to the sub-prime freeze. Afterwards everything goes through the primary dealers and the Fed?

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