The Dow is up 850pts (6.5%) so far this year. The question has to be asked..is this just the start of a rally that will proceed beyond the wildest dreams of the most deluded permabull, or is it yet another tease -before the next fall, as was the tech bubble peak of 2000, and the property bubble plateau of 2007?
Dow'monthly, 20yr, historic
Dow'monthly, 6yr
Dow'weekly, 2yr
Summary
It is understandable that many - not least the maniacs on clown finance TV, are getting rather excited over the Dow. Its a mere 46pts away from the psychological 14000 level. Even more exciting for the market watchers is the historic high - Oct'2007 @ 14198 is now within easy reach.
Considering the underlying momentum, and power of this opening month of the year, the Dow will surely hit the 2007 high...and break through - just as the Transports and the Rus'2000 indexes already have.
Yet..that issue is minor. The real question is what then?
To the Moon (and beyond) or the caves of hell?
I don't know where we are going. No one does. The only thing I think I can safely assume is what the Bernanke would 'like'. Mr Chairman would no doubt be seeking a market 'to da moon'. Dow 20k..30k..50k....and just keep on going. After all, that is all a central banker knows, to create artificial wealth....to maintain an illusion...to placate the populace with the belief that they are better this year..than last.
We have the Federal Reserve now printing just over 1trn each year, and throwing that money into the system via MBS and T-bonds. A lot of that money is just going to sit on the hard drives of financial institutions. Certainly though, not all of it. The tens..if not hundreds of billions - which could be leveraged 10..20 or even 100 times, will filter its way into the US capital markets..and will doubtless bid up ALL asset classes in the months..and years to come.
After all, QE3 was indeed specifically highlighted as QE without end. ALL talk of QE ending anytime soon is to be dismissed, just as any talk from the Democrats AND Republicans of their claims to 'fiscal responsbility'.
In many ways..I sure don't envy being the Fed Chairman. Contrary to what some often post, I do genuinely believe Bernanke himself truly believes in what he is doing is the right thing.
I can only hope the historians of the mid 21st century will have the 'facts' before them..and can accurately note what happened during these bizarre times.
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As for Wednesday, we have ADP jobs.and GDP Q4 data. The latter of which I am particularly interested in, but then..its just a number, and largely artificially propped up by the over-spending (via money creation) of the US Federal Govt.
With AMZN earnings coming in poor...but the stock rallying to new highs in after hours...what more needs to be said?
..other than we are in uncharted murky waters...where we go from here...only the gods know.
Goodnight from London
