Source: Wikimedia.com

Dear Diary,

The Dow rose 323 points yesterday, or 1.8%.

People come to think what they must think when they must think it. But what do they think now? Why do they think stocks are so valuable?

Apparently, they believe that Janet Yellen, Mario Draghi and Haruhiko Kuroda – the powers that be – will continue to make stocks go up.

The Fed has stopped active liquidity pumping. But it still has its hand on the pump handle, just in case.

The European central bank is promising and preparing to pump as soon as it can get the Germans out of the way. And the Japanese – the world leaders in modern state finance – are pumping with both hands.

Gaming the System

Since 2009, the Fed has put more than $3.5 trillion to work on investors' behalf.

This – along with the help of the ECB, the Bank of Japan, the Bank of England, the People's Bank of China, etc. – has helped lift stock markets by $18 trillion.

And corporate chiefs – now back in their cushy seats after the holidays – are borrowing more money to buy their own shares. They, more than anyone else, have figured out how to game the Fed's system.

They take the Fed's zero-interest-rate credit. And they use it to buy back their own shares. This pushes up the value of the remaining shares. Which leads to big, fat bonuses.

And so one of the wonders of the modern financial world unfolds before our dumbstruck eyes: borrowing from someone who has no money… charging it to someone else's account… and pocketing a good part of the cash.

The average S&P 500 CEO got an $11.7 million compensation package in 2013. Last year must have been even better, though we don't have the figures yet.

Meanwhile, the dollar rises and foreign investors move their money into US stocks and bonds, seeking safety and capital return in a market where the former is illusory and the latter is fraudulent.