Bulls and Bears

Had a conversation with a stock-savvy classmate on Monday. Asked him if he thought our stock markets were hitting record highs because the Wall Street pros thought Trump would win in November? His response was that it was more likely due to the enormous liquidity being pumped into our economy by the Federal Reserve Bank because of Covid. (Money has to be put to work somewhere.)

This is certainly likely ... since we saw this same stock market rise during the Obama administration due to about $10 trillion of liquidity injected during the Fed’s three phases of Quantitative Easing  ... combined with essentially zero interest rates.

Now that we effectively have zero interest rates back again, this is another inflator of stock prices. The prevailing interest rate is what one uses to discount the future corporate earnings stream to establish its stock price ... and forever zero rates thoeortically justify infinite stock prices. Calm down pilgrim ... it’s just theoretically ... we’re living in the real world ... and nothing is forever.

But, somehow I have to believe that if it becomes obvious  the Biden/Harris ticket will be clear winners (and the fake Indian as Treasury Secretary), we would not be hitting new stock market  highs ... more liquidity or not.


STAND UP FOR AMERICA!