This transcript is automatically generated
The -- shattering its all time high and closing at a new record high.
Bypassing the record in October of 2007.
Look at that chart my friends.
The last time the Dow was this high apple had just sold its first I found.
Can you believe it.
The still high is closing a chapter to our financial crisis but what's tomorrow going to bring skeptical professional investors.
Are already looking for an exit strategy and small investors many of them have stayed out of the game.
Maybe because they know this rally's getting fueled by Ben Bernanke and the rest of the Federal Reserve.
Every time Bernanke prints money stocks take a leap higher.
And so does the Fed's balance sheet ticking up to three trillion dollar sell the stock market and the Fed's balance -- -- -- used while the economy keeps getting squeezed the gap between Wall Street main street is far from narrowing with more on this mark Calabria.
Director of financial regulation studies at the Cato institute and -- C pet the CEO.
Of fearless well welcome to you both it's great to have you here on this historic day.
Yeah I was watching Arab coverage of that -- long time stock trader named Teddy Weisberg said.
Well tonight's beat you realize we're running in place and from a small investor's point of view I think the take away as.
We heard here five years ago give me something else RC what do you say is this important moment.
You know it it's it's important in the sense that.
So much manipulation and money -- has pushed up to these levels I do think it's funny that within twenty in 24 -- will hit the four year mark.
The market bottoming in march of 2009.
Quite good point it's -- if if anything it's gonna increase volatility.
And that's true whether it was the Dow or any other individual stock went and he went whenever something hits a lifetime high there's going to be increased volatility in the reason that concerns me is.
I don't think the people that are necessary coming into the Dow Jones today they really want to be and I think they're coming in because they feel like they have to which means they are -- -- -- conviction.
What's getting so if this goes against that really -- I have market here mark Calabria.
You thinks about these things very intensively all the time.
You know -- today I was thinking what happens when the Federal Reserve tries to unwind that three trillion dollar balance sheet.
Their predictions out there today even today that the ten year treasury to get a three and a half percent.
There could be big changes here with big ramifications for the economy and individual investors savings.
And that's really the fundamental question because I think right covered the market's been predominately driven by the Federal Reserve.
There's some change in fundamentals but really not enough income growth the labor work is just too -- And so the real question is when we get to the point where the Fed starts majora liquidity we all the fundamentals have caught off.
Will lobbying group income growth by then we'll be employment growth by then.
I really don't think there will be and so when the Fed starts to pull away that liquidity.
I think you'll see interest rates go up I think you'll see the market start to come down and I want to emphasize these things can actually happen quite quickly.
I think the Fed is betting on a gradual withdraw that the markets -- -- overreact and they really are playing with fire here sudden I'm very concerned.
That we get to point -- but it's gotta be six weeks six months.
Might be two years or longer but we really gonna get -- this could turn -- They -- -- I don't think anybody prior to say January was thinking and I have a quick change.
Coming from the Federal Reserve are seeing what do you see is the ramification the impacts of the Fed unwinding this debt.
I see a destruction of wealth.
I mean did the Fed encourages bad behavior encourages dangerous behavior so it doesn't want people to save it wants people to spend.
It's actually targeted inflation for the currency -- mean this is this is amazing that they wanna lose 2.5 percent in purchasing power year.
So this whole thing is being held together by deficit spending and money printing and back -- And just over the last four years to think about this just just on a cash accounting they spent a trillion dollars to get the Dow.
To go up not affect its pulled the way what's can hold up the GDP is what -- to one point 8%.
That it can be read this point senator -- value handling well -- -- -- -- by 1980s.
And 19% and I come here if I could RC.
Mark Fuhrman is sequestration was supposed to be a disaster for the markets and they ripped right through it.
-- look at what's going on a marketplace and you have to say yourself here we ER.
And again at the levels where the market imploded and the economy along with it.
Is there another bubble that will burst and take -- -- do you see anything like that on the horizon.
I'm I do what I am certainly very worried about things in the equity market but I certainly should say this -- and I think equities are the only place to be in the long run because all the other turn it just looks so bad they're real dilemma facing.
The real dilemma facing investors is almost nowhere to put your money that's safe today.
And so I think a lot of that's what's driving the equity market.
In a few choices are you gonna put in treasuries are you gonna putting corporate bonds those look even worse so again.
Very hard choice what what safety you can find.
So I do think when rates start to go up.
You're gonna see that takes some of the steam out of the housing market you're gonna see that takes some of the steam out of the equity markets right and that's gonna hurt it's gonna hurt consumption it's gonna be a drag on the economy and -- CD you can -- -- -- is our stocks at best place but your money right now.
I have -- -- -- market on May question the flea markets may and -- you know it's a pretty good source of little factor yet let me answer this.
Let me answer it this way if if you had ten years do you put your money ten year treasury air Procter & Gamble you put -- Procter & Gamble you put in McDonald's -- ExxonMobil.
But is that the best place is relatively speaking so I'd rather have my money and Procter & Gamble and kind of like that then -- ten year treasury.
Market -- -- great job fascinating conversation I feel eliminated appreciate your time with the although you didn't necessarily feel that much better about what's going on the fact that Africa thank you so much.