As one writer on TraderPlanet said, “Message For The Market – Slow and Steady.” The point is clear – until we have something extraordinary, the market will chew forty times, swallow slowly, and digest the daily stream of easy news. The next phase of the market is all about central bank policies around the globe.

  • Global equities set a new record high and bond yields sank to fresh lows on Thursday as investors positioned for an extended era of cheap money ahead of the European Central Bank’s looming bond-buying scheme.

So what is wrong with cheap money? Some argue it is an aberration of the free-market system, that it alters the principles of capitalism, that it perverts the market. Okay, in an ideal system, principles work, but capitalism, the free-market, has never been anything like those boys in The Enlightenment painted it. It never has been the picture that Adam Smith painted in his famous 1776 treatise, The Wealth of Nations.

  •  Governments in South Africa, Hong Kong and Singapore adopted a decidedly populist bent this week, expanding help for lower-income households and, in some cases, boosting levies on the wealthier members of society.

Governments, especially, the US government, have a long and successful history of intervening in the market and markets in general. The first foray from the US government was the establishment of the first Federal Bank in 1792 by none other than the free-market capitalist Alexander Hamilton.

  • Clearly, the new nation’s leaders had their work cut out for them: re-establishing commerce and industry, repaying war debt, restoring the value of the currency, and lowering inflation.

My point is that the US government, as well as global governments before and after it, has repeatedly used government money to intervene in the markets and the history of using that money is astoundingly successful. Think NASA (space travel), interstate highways, continental railroad, GI Bill, the 2009 stimulus package, and Quantitative Easing to name but a few. The forced shifting of wealth from the top to the middle (see above) has also worked out well.

So, the era of cheap money is nothing new, and, in the end, it will prove to be beneficial, not detrimental

  • U.S. consumer prices fell 0.7 percent in January, the biggest drop since 2008, as gasoline prices tumbled, and weekly jobless claims climbed to 313,000 last week, although durable goods orders rose for last month. The inflation data could provide a cautious Federal Reserve with leeway to keep interest rates low for a bit longer.

The Fed will do what it has to do, but, in the meantime, the fluctuating economic fundamentals will drive the market. Occasionally, though, the market might get a bolt from the sky that will alter the flow of things.

  • The possibility that the U.S. Supreme Court will soon eliminate federal subsidies for people buying health insurance through the Affordable Care Act is the biggest story in politics and economics that no one wants to talk about. But the stakes in King v. Burwell, which the court will hear on March 4, could scarcely be higher.

Yup, taking away healthcare from millions of folks could be a hit to the market, as it would change a lot of finances for a lot of people. This case before the courts is another case of ideologues believing in ideal systems. Plato said it best. In my words, here is the gist of his thinking.

There is the world of the ideal, and then there is reality.  

Trade in the day; invest in your life …

Trader Ed