Janet Yellen’s latest talk was very telling.
The title of her talk was:
The Importance of Asset Building for Low and Middle Income Households
The title alone is very telling. Fed policies under Bernanke and Yellen have proven absymal at creating jobs or boosting incomes. The only thing the Fed has done is push housing and stock (asset) prices higher.
Thus, for Yellen, the means of improving one’s lot in life has nothing to do with obtaining a higher paying job. The best way to move up in life is to own stocks… or a house… or preferably both.
This is how the Fed thinks: in terms of asset prices and leverage. These are items that only the top 0.1% of Americans really benefit from. Indeed, the Fed’s very policies (low interest rates, plenty of liquidity) benefit the wealthiest the most because these individuals can use their wealth as collateral in order to leverage up and benefit from rising asset prices.
This is the very strategy Larry Ellison has been using for years to live beyond his even ample means:
How Larry Ellison Actually Funds His Lavish Lifestyle
One of the mysteries surrounding Larry Ellison is how he can afford so many mansions, islands, yachts and planes, all while retaining his shares in his company.
Yes, the Oracle CEO is one of the richest men in the world, worth over $30 billion. Yet he sells only small amounts of stock under a schedule stock-sale plan. And last I checked, yacht builders don’t take Oracle stock for payment.
Now we have some clues as to how Ellison funds his acquisitive lifestyle.
According to Oracle’s proxy, filed this month, Ellison has pledged 139 million shares “as collateral to secure certain personal indebtedness, including various lines of credit.” In other words, he’s got over $4.2 billion worth of stock pledged for personal loans.
The multi-millionaire or billionaire can leverage up to invest in real estate or stocks… the average american cannot. Indeed, over 95% of Americans cannot buy a home in cash. So buying a home means going deeply in to debt, not generating wealth.
Indeed, the only way of building wealth through real estate for most Americans would be if you bought a home and the home’s price increased substantially to the point that selling would actually turn a profit beyond closing costs, taxes (both capital gains and property taxes for the duration of your inhabiting the home), and moving.
1) home prices have to increase dramatically
2) you have to a LOT of variables work out in your favor.
The fact Yellen believes in this stuff is telling. You won’t hear the Fed talk about incomes or jobs because the Fed has no clue how to create either. But asset prices are easy to boost… just spent $3 trillion and you’ll get a roaring stock market.
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Phoenix Capital Research