What is the long-term effect of the Federal Reserve keeping interest rates low?
[Fed chairman Ben] Bernanke is making sure that we don't get a decent risk-free return. It's brutally unfair to retirees. He's doing this because if he keeps rates ugly enough for long enough, we will reluctantly filter our money into equities. A higher stock market induces more consumption and is helpful short term to the economy.
The bad news is every penny of that gets given back. It's like a pact with the devil: You make your money by pushing stocks up, but then inevitably the market must go back to fair value. When it does, it creates an anti-wealth effect, usually at the worst possible time.
Top investment strategist weighs in on today's market - Jun. 27, 2012