GEOFF BENNETT: As we reported, this has been a big week for the stock market.
The Dow Jones not only closed above the 40,000 point mark for the first time today.
The much broader S&P 500 and Nasdaq also hit record highs this week.
Markets have recovered from recent 2022 lows and the Dow Jones is about 40 percent higher than when the pandemic began.
Roben Farzad joins us now.
He is the host of the "Full Disclosure" podcast on public radio.
It's always a pleasure to see you, Roben.
So, how important is it that the Dow Jones has reached the 40,000 point mark?
Because the Dow doesn't tell us as much about the economy as the S&P 500.
ROBEN FARZAD, host, "Full Disclosure": It's a great talking point.
Everything seems expensive right now, whether it's housing, cryptocurrencies, gold or stocks.
On the other hand, at the beginning of the century, there was an infamous book called "Dow 36000."
And it took forever for the Dow to get to 20,000, 25,000, let alone 40,000.
There is another school of thought that says the Dow Jones should be much higher if it were planned more rationally, for example if Apple or Amazon were added, or if there were other components right now that better represented this economy than the components of the old economy that are still at it.
So... but we'll accept it.
But nothing is really cheap in this peculiar economy.
GEOFF BENNETT: So what's behind the broader rally in markets right now?
ROBEN FARZAD: Artificial intelligence.
We have a semiconductor company called Nvidia, which suddenly becomes a $1 to $2 trillion player.
Lots of enthusiasm for AI
boom.
How will this impact manufacturing, construction, journalism, media, all of these powerful semiconductor chips that will be needed, staffing, consulting and professional services that will be affected by it?
So it's almost a parallel Internet.
We have had companies with record profits because they have pricing power.
And, strangely enough, that happens to stock market investors.
There was a time when you worried that inflation would kill stocks.
But if you're actually buying a Chipotle, if you're buying a home builder, you have these portfolio companies that are driving price increases, then you as a shareholder are participating in that, hence the Dow 40000 and the S&P in a total level. high time.
GEOFF BENNETT: So, taking that into account, and adding last month's worse-than-expected jobs report, is this a general indication that the Fed might finally take this step of cutting interest rates?
ROBEN FARZAD: It's strange that we're having that conversation.
Asset prices are at a record high.
It seems like no one can afford a house.
There are bidding competitions left and right.
And yet the Federal Reserve is enthusiastic about cutting interest rates?
I think it speaks to the weakness of the economy, the fact that those who don't participate in this wealth effect, lower middle income people, lower income people, who have to overcome their credit card debt, who are struggling to make ends meet, get together in the middle of this inflation, the kind of food value shock at a McDonald's drive-thru.
The Federal Reserve has a blunt instrument.
We talked about this before.
And if they relax, does the housing market really need a stimulus right now?
Does the stock market need stimulus?
There is an intense debate on Wall Street.
And in fact, the Fed was supposed to raise rates earlier, and has been betting on it.
GEOFF BENNETT: What I hear is that this is not enough to improve Americans' overall perception of the economy.
ROBEN FARZAD: Well, what am I going to do, withdraw my profits from the stock market?
My 401(k) feels bloated.
The sticker still surprises me.
I go into a Chipotle.
An extra serving of chicken is $4, Geoff?
Come on.
Guacamole, four dollars?
It's not like I have that money.
GEOFF BENNETT: That's real money, yes.
ROBEN FARZAD: That money is in a log issue, but it's not like it's giving me a dividend to deal with the real-world shock of gas, housing, rents, clothes, whatever.
I mean, auto insurance is a strange, strange economy.
But when has the economy not been strange?
GEOFF BENNETT: So how do you think this will play out in the future?
ROBEN FARZAD: I don't know how we put the genie back in the bottle.
As I said before, this is the first time in a generation that we are facing capital-I inflation.
And the Fed, Powell's Fed, told us a few years ago that this was transitory, that is, it will pass.
But this once-in-a-generation pandemic comes along, the plains are flooded with money, and it's really difficult to recover all of that and normalize it.
What is a normal interest rate?
What is a normal stock market?
What is a normal real estate market?
I think right now that's a $15 or $20 trillion question.
GEOFF BENNETT: Roben Farzad, I always enjoy talking to you.
ROBEN FARZAD: Same thing.
GEOFF BENNETT: Thank you very much for coming.
ROBEN FARZAD: Thank you.
