Since our last written comment in March the markets are indeed higher. Money continues to flow into U.S. investments from around the world. Central Bank easing is also a major factor. This week the Central Bank of Europe cut rates from 1.5% to 1%. This tends to send European investors in search of better yields elsewhere. We continue to be constructively short term bullish on stock prices.
The question we ask ourselves is, how long can the Central Bankers of the world keep up with this massive injection of liquidity? When will the Federal Reserve Bank of the U.S. (Ben Bernanke) … read more
The stock market is making new highs. The fuel for this rally is continued central bank liquidity and a re-allocation of funds from Europe to the United States. The thinking in London (neck and neck with NYC to be the largest money center in the world), is interesting. They look for flat economic results in Europe. No collapse but yet no growth. In general they believe the British Pound and the Euro dollar will go lower in value in the next 2/3 years. They see the European Union going through 4/5 years of austerity. Thus, the United States looks okay … read more
As we wrote in our November comment, the fiscal cliff issue turned out to be a non-event. Also, as we suspected, the investment markets have indeed rallied higher. The overwhelming driving force of this rally is the liquidity being provided by our Federal Reserve Bank with help by other central banks around the globe. Although intended to jump start economies and create jobs, this liquidity continues to find its way into equity markets. This is a reckless action by central bankers. To our knowledge, this printing of money at such a massive scale is unprecedented in modern history. Thus, throughout … read more
The subject of going off the “fiscal cliff” if the congress and White House fail to act, is nonsense. There is no evidence that a cut in government spending guarantees’ a drop in economic activity. This is also true of an increase in taxes. This theory is based upon flawed Keynesian economics. Let’s revisit recent history. Did an 820 billion dollar government spending program do anything to stimulate the economy? Why then will a cut in government spending hurt the economy? In addition to this the cut is not a cut. It is a reduction in the growth of spending! … read more