But, of course, stocks are up almost 17% in the last year, and just under 13% annually over the last three years, and QE is NOT reaching the stock markets anywhere near so efficiently as it would if it were a direct cash distribution to shareholders.
So the penetrating thinker, John Hussman, here:
[T]he suppression of risk premiums [is] the remaining and primary effect of QE. In other words, QE has not increased the value of equities. It has only increased the price, but that increase in price has no significant fundamental underpinning.
To see this, first consider cash flows. Imagine that instead of attempting to boost stock prices indirectly through quantitative easing, the Fed took the candy-land approach of literally handing the $85 billion directly to stockholders to reward them for owning stocks. How much would that direct cash distribution benefit a stock market with a $17 trillion market capitalization? Do the arithmetic. Only 0.5% a month. Yet investors have chased prices at a far more rapid pace as a result of quantitative easing. Remember, of course, that the Fed is not in fact distributing cash to shareholders.
Presently the effect of such QE would probably be even less than 0.5% per month if every point of the Wilshire5000 represents a multiple of $1.2 billion, yielding a total market cap far higher than $17 trillion. A 0.4% per month rate of QE on $20.5 trillion of total market cap comes to $82 billion a month.
