investmentresearchdynamics.com / By Dave Kranzler / March 1, 2017
The Dow and the S&P 500 stock indices are emblematic for the degree to which the U.S. economic, financial, political and social system has dislocated from reality. Insanity prevails in a system that is corrupted to the core. “Going down the rabbit hole” is a popular allusion in reference to the surrealism that has enveloped the American system. I’d hazard to assert that it would take a few tabs of LSD to make today’s world believable. The fact that Donald Trump is President says it all…
With regard to the stock market, if you studied finance anytime from the 1950’s until the mid-1990’s, fell asleep for 20 years and woke up to today, you would conclude that the opposite of everything you learned is now the truth. It started in the late 1990’s when Greenspan coined the “new economy” mantra and scam artists like Henry Blodget got everyone to believe that “new economy” stock valuations could be derived from the number of “clicks and eyeballs” received by a company’s website. And I thought that was insane.
The market has never been more dislocated from fundamentals than now. Since when do stocks spike up on the threat of a rate hike? Pretend rate hikes are now great for stocks and bad for gold even though historical evidence suggests that actual rate hikes have just the opposite effect on both asset classes.
I’m wondering if the hedge fund algos are already pricing in the move higher in stocks that occurs when the Fed fails to follow-thru on rate hike threats…While the Dow hits a new record every day, the amount of Government spending and debt hits a new record every 60 seconds. The rate of debt creation, public and private, dwarfs the rate of appreciation in general stock prices.