I repeatedly see comments that the market is irrational, that there's no fundamental reason for it to be this high, etc. etc.
Let me say this again. The market responds to liquidity and emotion. That's it! Quit worrying about whether the fundamentals support where the market is at.
That being said the fundamentals most definitely do matter. As some one once said in the short run the stock market is a voting machine but in the long run it's a weighing machine.
The next basic truth is that you can't get something for nothing. If that were possible we would never have bear markets because the Fed could just forever print away any declines.
I got news for you every nation and empire the world has ever seen tries to go down this path. The Fed is most definitely firmly on this path. I also have news for you it has never once worked. Nada! It won't work this time either. Inflating the money supply always leads to inflation, especially if you happen to be in a commodity bull cycle. Guess what? We are in a commodity bull cycle.
Now the Fed can throws billions or even trillions of dollars at the market and levitate it but sooner or later that liquidity always leaks into the commodity markets. When it leaks into energy you end up with $122 oil. Oil is the life blood of any economy. If the price of that lifeblood starts to spike it puts a crimp in economic expansion. There's just no way around it. If the Fed continues down this path they will avoid a deflationary depression like we saw in the 30's however they may very well put us in a hyper inflationary depression like Wiemar Germany.
I've pointed this out before but here goes again. Notice that the S&P is up 145 points from the bottom. That's 11%. That's not bad right? However in that same time oil is up 44%. Everything food, gas, copper, steel, etc. etc. is rising much faster than the stock market. Folks it's hard to see but the Fed is stealing your purchasing power right in front of your eyes and the sad thing is we're happy about it because the stock market is going up.
If this keeps up the market is going to rally us right into the poor house.
Gold Miners - What next?
9 months ago