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Great Idea

see quote this week from Larry Fink of Blackrock:

“Working class people need to work harder and buy risky financial assets.”

His quote gave me an interesting idea and I wanted to get your thoughts on how this would play out and why we should or shouldn’t try this…

What if the Fed stops it’s ongoing QE program immediately.  They then start scaling out of ALL $8+ Trillion of Treasuries, Mortgages, and Junk Bonds they own.    The market participants with cash would then need to determine fair market value for those assets through price discovery.   This would get volatile and investors would have to sell other assets to buy those bonds at attractive prices.    Ultimately one would have to assume that borrowing costs and credit spreads across the board would go significantly higher.

This would provide a huge headwind to those companies taking the monopolistic approach of operating at a loss to win market share.    It would essentially force everyone to operate at much higher profit margins to remain solvent.

It would significantly dampen the multiples of equities and real estate and it would drastically shrink the wealth inequality gap.    As the chips fall where they may, those with leverage would be liquidated, and the reward for labor would be significant as those working people would now actually be able to afford things.

While chaotic & unpleasant, this would potentially create a return to a real market.   The natural forces of economics would eventually play themselves out and give us all a fresh start.

Those making policy have a huge conflict of interest to try something like this (because they are in bed with Blackrock, Citadel, Goldman Sachs, etc).    They are essentially representing the nobles who are oppressing the peasants via the cruel financialization of an entire economy.

Let’s assume they handed you the keys.   As a financial advisor for high net worth individuals that own artificially inflated assets, you have a huge conflict of interest as well.

Let’s set that aside….  You seem like a very genuine, honest, highly intelligent, and kind-hearted person.    Please explain why you would or wouldn’t do this?

Thank you