The US Dow Jones Industrials at Record Highs

One of the key benchmark of the US stock market finally sets a new record. 

From the Bloomberg

America, birthplace of the credit crisis that erased $37 trillion from global equity values, is leading the world’s stock markets back.

The Dow Jones Industrial Average (INDU) rallied 126 points to 14,253.77 yesterday, joining Denmark’s OMX Copenhagen 20 Index among major stock gauges in the 45 largest markets to regain all-time highs, according to data compiled by Bloomberg. Four years after bottoming, equity benchmarks in those countries are an average of 27 percent below their peaks, the data show.

About $10 trillion has been restored to U.S. equities, fueled by the fastest profit growth since the 1990s and monetary stimulus from the Federal Reserve. Retailers, banks and manufacturers led the recovery from the worst bear market since the 1930s as the Dow took less than 65 months to rise above its previous high set on Oct. 9, 2007, more than a year faster than the recovery from the Internet bubble.

Here is what I wrote a month back,

If the actions of the broader Russell 2000 (RUT) and Dow Transports (DJT) should serve as clues, then we are bound to see the Dow Industrials and the S&P in new record territory soon. That’s because both the RUT (brown) and DJT (black) are at fresh milestone highs.

And US Federal Reserve chair Ben Bernanke must be very pleased as such has been the declared object of his wealth effect theory channeled through his portfolio balance sheet management (euphemism of manipulation)

Of course, he and his crew doesn't say that all these has been meant to shore up the banking cronies and the political class via the welfare-warfare state.
 
The fact is that the Dow’s record highs have been crafted as the US Federal Reserve’s Balance sheets also reached a milestone.

Chart from the Cleveland Federal Reserve

From St. Louis Federal Reserve

Major easing policies of ZIRP and QEs have driven US money aggregates M2 and MZM to record levels, as high powered money (adjusted monetary base) have also gained significant upside momentum (right window).

Like Philippines and the rest of ASEAN, the manic stage of the bubble cycles, which has been a global pandemic, has been intensifying. 

It would be a major error to see or interpret the current booming markets as "permanent" or "structural", as one day all these artificial props will reach its maximum threshold levels where imbalances will either have to be exposed and undergo a painful adjustment phase (bust) or that such imbalances will reflect on the purchasing power of the currency (currency crisis).