Yes, I changed my mind. I am very negative about the current economic circumstances, and rational I would say that we should go down below 10.000 for the Dow. However, despite all other reasons, every time given after a rise for the Dow, I think that when you look with a ``helicopterview`` to the indices, that we are just watching ´´asset-inflation´´. According shadow-statistics the real inflation rate is more than 11 percent on an annual basis, and this is just priced in the indices. Not a real increase of value, but just compensation for inflation. I bought lots of calls dia jan.200 calls for just a few cents. In case that inflation accelerates the same will happen to the dow jones index, just for compensation of inflation. Those calls I mentioned would skyrock. A real increase of the index would be ridiculous given the economic situation, and this is the reason that the current rise of the dow (just to compensate and anticipate inflation) is confusing people.
Just think one minute without getting hyped by the momentum...
I compare our current situation with the science experiment of the frog. If you throw a frog into boiling water, it will jump right back out...On the other hand, if you throw it into the cold water and warm it up steadily to boiling water, the frog will stay in and will die.
It is the same thing with us and the markets. Figures/stats are seriously awful (billions of losses here and there). 9 months ago, we heard shitty numbers and got scared and sold like crazy (the famous frog that jumps right back out). Today, it's even worse than 9 months ago, but we're now used to these awful numbers (the gros that stays in the boiling water)...and as humans we tend to be optimistic and see the upside of the thing. We want to be positive.
We wanted rate cuts cause it would help people (banks) to get out the crap...but this killed the dollar and boosted inflation...And let's face it, inflation is probably worse than a recession, it is just more "sneaky"...it is like a cancer, slow but devastating from inside. We'd rather have a recession purging all excesses and get back on track and move on to higher highs...
Jonathan, I understand your message, and I fully agree regarding fundamentals. Really bad......
Not looking into detail who is pushing the market up at this moment I just look to the total picture.
Declining dollar, high inflation.
What you would do with your cash dollars ? I prefer to buy a part of a company instead of just seeing my dollars decline, and almost not getting interest. The big overseas investment funds do the same. Better to buy a part of a company. Results of companies operating worldwide are also ``optical`` looking better then before. Coca-Cola is receiving hard ccy as income from international operations, pushing the profit of the company. The company coca-cola is listed in dollars, so nominal de increase of the stock is justified. When converting the price of the stock to euro there would be no (relevant) change.
Nominal the dow-jones index should increase, because the 30 components of the dow are all companies operating internationally.