What is fueling the S&P's growth?

Discussion in 'Economics' started by kmiklas, Jul 21, 2016.

  1. kmiklas


    I stare at the S&P on my screen (SPY), almost in disbelief. It has almost tripled since the crash in 2009, and has more than doubled since a lull in 2011. What is fueling this growth? Have there been advances anywhere, that have increased value to this extent? It makes no sense to me.

    After some reading around, the big arrow points to interest rates being held at near-zero levels. This makes money very cheap to acquire, and so it pays to borrow at low rates, and invest. Isn't this exactly what happened before the crash in 2007? The Japanese Yen could be borrowed very cheaply. When the rates spiked up, it was one big margin call. It looks like another big bubble to me.

    As former President Bill Clinton said, "It's the economy, stupid." Do the Dems fear that they'll get voted out if the economy goes south? Is President Obama working to keep the interest rates low, so that the S&P continues to happily move up?

    Is there any way to see how deeply the banks are leveraged? How much have they borrowed? How deep in are they?
  2. Yes, monetary policy. Low interest rates. Increase in the money supply. Credit is cheap, making assets easy to acquire, which drives up prices. Add to that the US is the best house in a bad neighborhood, so to speak, and there's a flight from macroeconomic question-marks (asia, europe) to the US, because stability and reference currency.

    That said, the US is still in economic recovery, and we're still deleveraging, so US monetary policy is not, as some would have it, reckless. It's actually been working pretty well. So, yeah, asset prices are high, but not without cause. Bubbles are accompanied by irrational exuberance. You see any exuberance here?

    Go to YouTube and have a look at Ray Dahlio's "How the Economic Machine Works". That'll help.
    Stadtmuller Von Texas likes this.
  3. Baron

    Baron ET Founder

    piezoe likes this.
  4. kmiklas


    You peeps are OK. :thumbsup:
    DaFerg, Better Yeti and Baron like this.
  5. There is no proof that stimulus works... That belief is the status quo... You can't prove we wouldn't be in a similar or better condition without it or so much of it... Believe whatever you want... The fed or gov for that matter has only net negative effects in the long run... Fred does nothing but benefit one group at the expense of another totalling to a net negative... You have the fixed income and wage earners sucking wind... This environment promotes malinvestment... The borrow and bet and borrow and bet.. driving down yield and building leverage and fragility
    ... But hey listen to the butcher as he feeds you if you like turkey
  6. People aren't as scared to spend money as they used to be.
  7. true.. you sure can't save it
  8. Baron

    Baron ET Founder

    That was an excellent video.
  9. I like to study people who generate alpha. Dahlio clearly does that.
  10. RRY16


    When is the next PBHFA Event coming up?
    #10     Jul 21, 2016