Tech Stock Run-Up Creates INSANE Amounts of Wealth for Silicon Valley as Americans Face Layoffs Amid Uncertain Economy
This week, Jeff Bezos officially became the richest person in the world and the first person to be worth $200 Billion. Amazon’s stock is up roughly 80% since the beginning the year, having benefited from the change in American lifestyle amid the pandemic. Bezos holds 11% of the company and, as such, his wealth has increased significantly. In addition to Amazon, Bezos owns the Washington Post as well as Blue Origin and other investments, but, Amazon makes up more than 90% of the entrepreneur’s fortune.
And Bezos isn’t the only one making big bucks thanks to the growing value of the company he founded. Indeed, the FANG stocks are on a tear and the Silicon Valley tech set is seeing vast increases in wealth, as a result.
Facebook’s Mark Zuckerberg emerged this week as a brand new centi-billionaire, with roughly $103.1 billion..and his worth grows by the billions each day. On Wednesday alone, amid the run-up in Facebook’s stock price, Zuckerberg gained another $6 billion — ending the week firmly in the centi-billionaire category.
Why the run-up in stock prices—creating massive billionaires out of some–while many Americans struggle with layoffs and economic uncertainty?
Within the tech sector, an increase in valuations is partly justified given that we are vastly changing how we live and the companies that can support these changes will benefit. Working from home means Americans are more present than every before on social media companies like Facebook…and are using primarily online services, like Amazon, for their shopping. The economy is undergoing a seismic shift and the expectation is that technology sector will offer the most opportunities for investors.
However, do not discount the unprecedented effect of the Federal Reserve on this marketplace. By signaling that rates are going to remain low for many years to come, and by telling the world the Central Bank would actually welcome some inflation, the Fed has effectively just told investors to,
“Find a bet–and put your money down!”
Effectively they’re telling the markets to not even bother being rationale!
And, that’s a problem.
Indeed, this kind of policy encourages reckless risk-taking…which, in turn, will assist the Fed in getting money invested into the U.S. markets. However, it could come with severe consequences when the jig is up. More importantly, in the near term, it is not the most efficient way to ensure our real economy benefits.
You see, the Fed’s policy has now, for over a decade, contributed to wealth inequality by disproportionately benefiting those that have money to invest at the expense of those who do not.
At present, it’s better than nothing (and certainly makes people feel better when they open their 401k statement) but, these gains in the Silicon Valley set’s net worth…as well as the gains in overall stock market… may not be entirely real.
Meanwhile, if the pro-growth economic policies of the current administration cease to exist? Then, the Fed…just as it did during the Obama years…will be forced to go it alone. So, f you think you’ve already seeing an overly active stimulative Federal Reserve? Buckle up. IF we lose the benefit of strong fiscal policy and are left with only the monetary side…then, hey, you ain’t seen nothing yet. Turn on the printing presses…let’s just hope the Fed doesn’t run out of ink.