Stocks May Be The Best Place To Invest Per The Fed

The Federal Reserve's move on Thursday to keep interest rates at record lows until late 2014 is a very telling monetary policy strategy.

Ben Bernanke's decision tells us that the economy is not recovering as robustly as it may have seemed in recent months. Or more importantly, that the US is a long way from generating sustainable growth. Why else would the Fed implement such a prolonged and historic monetary easing policy?

The Fed continues to do everything in its power to flood the market with free money, not just by printing, but by enticing companies to lend and spend at these low rates. It's encouraging savers, consumers and investors to borrow, invest and spend. This is achieved by creating a negative real interest rate environment. If a bank's deposit rate is close to zero and inflation is hovering around 2-3%, savers are actually losing money each year by not investing into alternative investments that provide a higher yield. This kind of environment hugely benefits the debtor and not the creditor as the debt is inflated away more and more each year.

For investors or corporations sitting on cash, the message is clear: invest and spend or watch your wealth erode. The Fed is making cash so unattractive that individuals and companies alike, will be forced to seek out higher yields, whether in the stock market, in real estate or other in asset classes that typically appreciate when the dollar is depreciating.