When everything else is down? Stock markets are up everywhere, USA , UK , India, Japan.
you12:When everything else is down? Stock markets are up everywhere, USA , UK , India, Japan.
I attribute it to the low interest rates, set supposedly to stimulate us. The new credit created(to satisfy demand for credit at low interest rates) goes into malinvestments. That is, investments which look profitable under prevailing interest rates but won't remain the same once interest rates start rising(when people start reassuring their real savings-consumption ratio). Thus, the new credit shows it's effects on the stock markets, as new money flowing in to capital goods industries.
In short, the seeds for the next boom are being sowed!
One word: Inflation. Inflation is good for equities for two reasons:
1. People move from fixed income investments: Bonds to Equities.
2. Equity prices reflect nominal earnings. So a corporation can earn/create the same amount of real wealth but have higher nominal earnings.
The best performing stock market in the world is the maket in Zimbabwae.
Because the Fed is pumping QE money into the big financials to get them to start lending but instead they're using it to try and make money in equities. It's just a false rally, it'll all come crashing down once the Fed stops buying all these worthless assets from companies like Goldman Sachs.
Hope for profits starts to prevail - "investment psychology" - that is all - as always.
Wall Street gets first crack at the new dollars.
Criminals, there ought to be a law.
Criminals there ought to be a whole lot more. Bon Scott.
you12: When everything else is down? Stock markets are up everywhere, USA , UK , India, Japan.
The blog on Mises.org, "A View From the Trenches", covers the stock market from an insider's look, almost every day. This image is from that blog.
Up?!?!?!!?
That's a matter of how you frame your comparison. Up from 6 months ago, but not 1 year ago, not 2 years ago, not 3 years ago...
The S&P500 was above its current level from '97-'01 and '03-'07.
And if you look at prices compared to earnings, stocks are overpriced...
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Do you remember when the Fed, the ECB, the Bank of Japan etc started printing like there was no tomorrow and some people started wondering where the money went? Well, it found its way into yet another bubble, though this will be relatively short-lived compared to others because there's truly nothing behind it, except perhaps for pharmaceuticals which are thriving on the present swine flu hysteria (guess why I know that). One of the invariable laws of economics say "cheap money will generate malinvestment" . Look no further for a practical example. Ordinary people and fund managers are desperate for investment opportunities since the housing bubble evaporated (not just in the US) and are turning to stocks. It happened many times before and we all know the drill.
In the meantime gold is screaming "inflation, inflation!"...
inflation
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I don't know the details but as a part of one of the previous bailout packages recipients of bailout money had to invest a percentage back into stocks. What we have today is a simple stock bubble and it will pop just like it did in 2007.
Additionally, As a representation that inflation is finally kicking in my gold and silver stocks are running wild.
Facts are facts, and I'm not too clear what the facts are. It is my understanding that the Fed did a lot of QE in the later part of 2008, maybe even into early 2009, but has quit. You are spot on right that the influx of money from the Fed has not led to the lending it was hoped to induce. So here is where my understanding breaks away from what you have laid out in your post. You say "instead they're using it to try and make money in equities". I thought it was going into their excess reserves accounts, and just sitting there, after all, excess reserves have ballooned enormously. Obviously, much of it is being applied to their excess reserves accounts, but maybe not all of it??? Maybe they are dividing it between reserves, and buying stocks? If that is the case, then I'd say you are absolutely right about this rally being artificial, and will come crashing down. I'd just like to know the facts about the flow of the QE money. As another point of cnfusion for me, Larry Kudlow likes to repeat the phrase that "even a banker can make money when they borrow at ~ 0 %, and lend at a higher rate".That idea makes sense too, but we just acknowledged a severe lack of lending. So, again, what are the facts? Just-the-fax ma'am!