The performance of the U.S. stock market over the last decade has been nothing short of astonishing. While the 2008 financial crisis raised serious questions about whether the country was about to suffer another Great Depression, the ensuing 10 years have proven that the nation’s central bankers and leading financial regulators were able to not only stave off that outcome, but they were also able to create fairly broad economic growth, at least for the top 20 percent of earners.
“In an age when a startup like Brandless can gain serious traction, P&G investors have got to reconsider what it means to be the world’s largest consumer-products company.” cc @brandless @TinaSharkey @idoleffler https://t.co/oz5x4hhqXm
— Shervin Pishevar (@shervin) March 30, 2018
However, there have been an increasing number of voices warning that the Federal Reserve has gone too far in its zeal to buoy the market in the wake of the 2008 financial crash. One of those voices has been that of Shervin Pishevar. As one of the most prolific entrepreneurs and venture capitalists in the United States, Shervin Pishevar has been personally responsible for the rise of such industry stalwarts as Airbnb, Uber and Social Gaming Network.
But in a recent tweet storm, Shervin Pishevar took to social media to warn people about the excesses of the central bank’s expansionist monetary policies and the potential long-term consequences. One of the problems that Shervin Pishevar identified was the overheated nature of current equity markets. Pishevar argues that the central bank’s quantitative easing programs has only succeeded in inflating a bubble. He says that for every dollar that the Fed spent buying Treasury bonds, less than $1 was added to the nation’s GDP. This, says Pishevar, is an indication that quantitative easing has largely been a macroeconomic failure. It has, nonetheless, been very good for those owning equities and those in a position to use cheap money to buy them.
Pishevar says that the most notable effect of quantitative easing has been the availability of nearly zero-interest money, which some of the country’s largest corporations have used gladly to buy back their own stock. This is what has fundamentally led to the serious overvaluations seen today in the equity markets. Pishevar says that these considerations nullify all traditional tools for estimating prospective returns. The 200-day moving average, he says, is worth less than the pixels it’s written on.