Generational Chance to Sell Equities?

Are tax cuts the final carrot in the free money episode we have witnessed over the last eight years?

Sven Henrich at the NorthmanTrader has an excellent article on The Carrot Top.

Henrich notes we have had 13 straight months of up in the global equity markets. However, central banking liquidity game has peaked and is dropping off:

On Thursday, the Dow blasted over 300 points higher on news the Senate would pass a tax cut.

Will it create any jobs? I rather doubt it and so does any thinking individual. I will have more on the beneficiaries of the tax cut later today.

Meanwhile, retail investors have been sucked in hook, line and sinker as noted by record ETF inflows despite this being the most expensive market since 1900.

Curiously, Goldman Sachs' economist Peter Oppenheimer says "risks are to the upside" in a Bloomberg video in the above link.

Henrich as a much different opinion, meticulously laid out with 17 charts.

Whether you are a bull or a bear, do yourself a favor and read Henrich's excellent article.

Mike "Mish" Shedlock

Comments
No. 1-18
Bam_Man
Bam_Man

It will continue as long as the ECB, BOJ and PBC keep expanding their balance sheets faster than the Fed is shrinking theirs.

Bam_Man
Bam_Man

BTW, the Fed was supposed to begin "Tapering" back in October, and their balance sheet hasn't budged at all.

Blacklisted
Blacklisted

I'm sorry, but the definition of an "excellent article" is not one that simply trumpets your own bias and beliefs. I have simpathy for people like you and Henrich, assuming you are sincere, as the debt problems and CB meddling certainly deserve criticism. However, just as the last 7+ years have gone against your logic and fundamentals, the next 7+ years will continue to befuddle the so-called experts because they fail to think globally and their historical perpective is way too short.

There are several flawed concepts stated as facts by Henrich, including the notion that rates and stocks can't rise together. The primary reason stocks are rising in the face of a stagnant-at-best economy is not QE, stock buybacks, the plunge protection team, or other manipulations put forth by the people that have been wrong for too long. The reason is foreign investment flows, which are an order of magnitude bigger than everything else, that are looking for a safer haven than their home currency.

What countries have worse debt and govt intrusion problems than the US? What happens to these countries when rates and the dollar rise? Where is all the govt bond money going to go when the govt bond bubble pops? Is peace going to break out anywhere? Since civil unrest and war are a direct result of turning the economy down, the answer is no. What has less risk - govt bonds backed by nothing and getting more broke, or blue chips backed by plant, property, equipment, and IP?

You and Henrich have it completely upside down. This is a generational chance to BUY equities. The only opportunity greater than stocks and silver is with a digital currency that is outside the fraudulent financial system, decentralized, and backed by a consensus of developers and users that loathe the establishment who brought us to this point.

SweetKenny
SweetKenny

@blacklisted yeah you a nameless internet troll knows more than Mish and Henrich... your ego is in a bubble like your precious Bitcoin.

Carl_R
Carl_R

what will the tax chance do to the average PE ratios in the market? Will they be back under 20 again?