With all the negative news surrounding the economy and the toxic assets that are still on the books of major banks, one unmistakable fact is the market doesn't seem to be at all interested and it continues its relentless rise, rationally or not. Could this be shaping up to being one of the greatest bull markets in history. In 1929 the world central banks were not as tightly concerted in monetary operations as they are today, and back then they did have the highly developed communications systems as banks have in in the new century. I think the DNA has changed in the structure of the markets, gone is the aphorism "No one is bigger than the markets", it was rather hard for me to accept but I beginning to take hold the greatest force next to God in this realm existence are Central Banks and their power of fiat liquidity. Markets will break New ALL TIME HIGHS in less than 6 months! Ask yourself why it can't and the market will prove you wrong just like it has to everyone else the last 6 months.
The only problem with this is that the dollar can't keep going down at this extreme rate for another 6 months without something seriously bad happening. And the market going up and dollar going down are linked at the hip.
"It's different this time." You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now. OK. Here goes. Write them down -- no handouts here!: 724 Solutions (SVNX Quote), Ariba (ARBA Quote), Digital Island (ISLD Quote), Exodus (EXDS Quote), InfoSpace.com (INSP Quote), Inktomi (INKT Quote), Mercury Interactive (MERQ Quote), Sonera (SNRA Quote), VeriSign (VRSN Quote) and Veritas Software (VRTS Quote). We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come. There, now that that's done with, can we talk about the methodology that produced those top 10 so that you can understand how, in a universe of a gazillion stocks, we arrived at those, so you too can figure it out? I hope we can because I have another 10 and still another 10 and another. They all do the same thing: They make the Web faster, cheaper, better and easier to access anywhere, anytime. They allow you to get on the Web securely anywhere in the world. They make the Web economy the only economy that matters. That's all they do. We try to own every one of them. Every single one. And if I had my druthers, I wouldn't own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe. Let's start with the world in the early 21st century, a world where capital is abundant for a chosen few and nonexistent for just about everybody else. It is a world where the whole of Wall Street and Silicon Valley is at your fingertips if you are creating the infrastructure for the New Economy, and a world where neither Wall Street nor Silicon Valley could give a darn about you if you are using that infrastructure.... http://www.thestreet.com/story/891820/the-winners-of-the-new-world.html
Indeed, that is why we have to re-define the word "bubble" in the neo-capitalistic world that has been plagued upon us all.
The ongoing discussion of dollar devaluation vs. asset inflation is a complex topic that has most academics scratching their heads. Do we have deflation or inflation? I think we have entered a quantum shift in modern finance and economics, much like evolutionary periods where profound and unexpected divergent changes provided a new trajectory for all organisms. The market organism has changed, much like the SOES Bandits are extinct and so too will the last bastion of truly free capitalism as we know it as traders
I think it's deflation only because of the amount of wealth that was wiped out. Consumers are simply retrenching spending, and since it's all about the demand of goods, and they're not buying, prices have to come down. Commodity prices, on the other hand, are being driven up because demand is speculative. In other words, people are driving up the price of oil, funds/big banks, other large speculators, are buying paper oil to drive up the price to hedge against a worthless dollar. That will eventually feed itself into the real economy and drive up prices down the road, but when? For example, I'll take the industry I know a lot about - Consumer Packaged Goods. Let's say you have a company that makes tomato sauce. Right now, tin (cans), tomatoes, and the cost of production (oil/gas) has come down in regards to last year. Last year, the company was able to take price increases to cover increase in COGS, because the consumer was living in an inflationary expectation mindset. Retail grocery expected price raises, and tacked on their own to cover their raised expenses as well. The consumer paid higher. Typical inflation. What happens now? Prices have come down to combat a lack in demand. It's become far more competitive. Margins are being squeezed. They will continue to get squeezed as commodities force higher costs, but companies won't be able to charge higher prices for fear that what little consumer demand there is will go to a competitor. Eventually, as all competitors raise prices, you'll see inflation. Actually, scratch that. You'll see "stagflation". as prices go up and demand stagnates. That is how this places out, I think.
Your comments are well thought out and in fact quite astute in your analyses. From my perch I view things much more metaphysically in relation to markets and general social behavior (existentialism). I think the dynamics between traditional perspective of economics have changed because the observer and participant have changed. Apology for sounding to eggheadish but people today view debt and prosperity entirely different than in the past, it is that structural change and the profundity of widespread narcism that has change us into a new paradigm. And this new territory I have yet to ascertain what is it that it will offer humanity. We may have new market highs but will our lives be in congruent in value and worth
i agree with nearly everything you said, but you've got to do something about that writing style <img src = "http://xroads.virginia.edu/~UG02/NewYorker/eustacetilley.jpg">