Making Money Alert: They Made $944 Million While You Slept

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

I rarely get eight hours of sleep these days, but that’s the recommended daily dosage according to the experts. If I had managed to get eight hours, I would have slept through the creation of $944 million. You see, that’s how much money the Federal Reserve prints during an eight-hour stint. This money supply growth translates into $118 million per hour, a figure you get when you do the math on the $85 billion in bond purchases the central bank makes each month.

So I ask you, with all of that money essentially created out of virtual thin air, is it any wonder that we’ve seen the Dow eclipse its all-time high set in October 2007?

The chart here of the Dow tells the tale of a market seemingly on a cocaine high that will, I suspect, end up in a really bad collapse for most investors.

Now, many smart economists think that the creation of all of this money via quantitative easing will result in massive hyper-inflation down the road. I suspect that this could be the case, but so far we haven’t really seen serious inflationary pressures. In fact, what we’ve seen is somewhat the opposite when it comes to the value of the U.S. dollar.

When compared to rival foreign currencies, the greenback actually has gained significant ground vs. currencies like the euro and the yen. I guess this situation should come as little surprise, especially given the so-called “race to debase” the currency we’ve seen in Japan and in many other countries.

The chart below of the PowerShares DB US Dollar Index Bullish (UUP), an ETF pegged to the fate of the dollar vs. a basket of the top foreign currencies, clearly shows that so far in 2013, the greenback has been the cutest puppy in an otherwise ugly litter of global currency mutts.

Now, because this race to debase, as well as the unprecedented monetary easing taking place by central banks around the globe, is something we’ve never seen before, nobody really knows how it’s all going to turn out. The result is a whole lot of uncertainty fused into this market’s DNA.

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I think this uncertainty is what keeps hedge fund managers, portfolio managers, newsletter writers and individual investors awake at night these days. Sure, it’s great to see the Dow hit an all-time high, but what happens when the monetary carnival leaves town and there’s nothing left but a vacant lot and a huge mess to clean up?

That’s basically the circumstance that we’ll all have to deal with at some point in, quite possibly, the very near future.

Finally, I don’t often refer to CNBC’s Jim Cramer, but he said something recently that I think was spot on. Amidst the jubilant mood over the market spiking to an all-time high on Tuesday, the “Mad Money” host said that this rally is sure to end badly and that investors need to be sure to have an exit plan in place.

I couldn’t agree more.

Cowboy Wisdom

“There never was a horse that couldn’t be rode or a man that couldn’t be throwed.”

–Will James, cowboy artist and author

The western artist was famous for nuggets of wisdom like the one here. I particularly like these thoughts, because it reminds us that we are capable of accomplishing a whole lot if we apply ourselves. It also cautions us not to get too full of ourselves, as even the best of us can get “throwed” by life’s difficulties.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.

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To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

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Continued enthusiasm about new economic data from the United States pushed the Dow Jones Industrial Average to an all-time high yesterday and a close of 14,284.

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