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You buy $100 of stocks expecting $5.70 of growth and income/year, writes GMO's Ben Inker (go to...

You buy $100 of stocks expecting $5.70 of growth and income/year, writes GMO's Ben Inker (go to pg. 18), taking aim at the wealth effect. QE comes along and the stocks are now worth $116, but still with an expected annual return of $5.70. What Fed wealth effect models don't seem to get is the overwhelming majority of equities are held with these sorts of assumptions. Can a day-trader buy a big screen TV? Yes, but endowments can't raise spending, a saver cannot buy a larger annuity.
Comments (1)
  • wapiti
    , contributor
    Comments (698) | Send Message
     
    finally someone else see this FED crap as a prop for consumer spending. When 70% of our economy is based on spending, what else can the FED do or want?
    PPT lives on!
    20 Nov 2012, 12:09 PM Reply Like
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