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Most Never Notice

I was walking through Grand Central Terminal this morning, as I always do, passing from the subway to our offices.  Within the terminal’s main lobby area, which is a true work of art and is a privilege to behold each day, I passed by a massive man dressed in complete military attire which included thick bullet-proof vest and a powerful machine gun.  I know that I’ve seen this before during the past few years many times, but today it struck me differently and got me thinking how de-sensitized we all become over time…accepting things as normal that in recent past would have been inconceivable.

I began to think about all the other aspects of life that today we all accept as being normal yet at another time, within my own lifetime, would have been deemed to be far from normal.  As a guy who’s spent his career in finance, markets, and investments, the first thing that came to mind as I reflected was the governments’ current deep involvement in markets, and most especially quantitative easing by central bankers.  To review, in November of 2008, in the midst of a serious panic, the Fed decided to engage in a policy of quantitative easing (printing money and injecting it into the market by purchasing mortgage-backed securities and U.S. Treasury bonds).  By the time they halted this foray in June of 2010 they had injected some $1.2 trillion.  In November of 2010, deciding that the economy needed more, the Fed initiated a six-month process of acquiring a further $600 billion of U.S. Treasuries, and this was called QE2.  In September of 2012, the Fed decided to pursue this same policy once again, announcing that it would acquire $40 billion of mortgage-backed securities each month for the foreseeable future and by December of that same year chose to up the ante to $85 billion per month.  Since August of 2008 the Fed has increased the base money supply by nearly $2.6 trillion, or an increase of 325%.  Talk about serious intervention!

So, now a mere five years since QE was first introduced, the amazing thing is that most people in the world either don’t even notice that it is continuing at an amazing pace and is, by its very nature, have a massive impact on asset pricing levels.  Others, who may notice, seem to now just accept this as being part of the new normal in the financial markets.  As the father of five, including boys aged 22 and 24, I am beginning to realize that this reality of today is the only one that they and their peers will ever really know.  Yes, they may read history books or hear old stories from their dad, but those are poor substitutes for experience.  They will accept government intervention into markets (financial, healthcare, education, etc.) much more easily than mine did since they know no other way.  And, witnessing how my generation has been willing to accept these new realities so easily, that says a lot indeed.

Change is incremental and mostly goes unnoticed.  Time and the passing of generations conspire to facilitate negative change without eliciting much protest.  As you go about your day, think about how different it is from your days going back 10, 20 and 30 years ago.  Try to recall your youth and the smells, tastes, cultural preferences, concerns and opportunities of that time and contrast it to those of today.  The changes have indeed been dramatic, but have happened incrementally so as not to really alarm us.

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