Loading ...Fixing the trade differences – which likely won’t happen in any meaningful manner – and taking interest rates to zero will not stimulate economic activity. The stock market is melting up because the western Central Banks have made money free to use for those closest to the money spigot. The banks and companies with access to the free money know that investing it in capital formation is a waste of time because real economic activity is contracting. Instead they plow this cash into the stock market (cheap loans to hedge funds from banks in lieu of margin credit and corporate share buy-backs).
The real source of the problem is too much debt. The global financial system is on the precipice of a Von Mises’ “crack up boom.” The melt-up in the chip stocks and unicorns is stunningly similar to the melt-up in the same chip stocks and the dot.coms in late 1999/early 2000. The “unicorn” stocks are this era’s “dot.comstocks.” Most of the hedge fund managers and daytraders were in grade school during the first tech bubble. They will remain clueless until the rug is pulled out from under them.
The stock and housing markets will eventually collapse because the foundation of debt on which both asset markets are propped will implode. This process of systemic cleansing started in 2008 but was deferred by the trillions in printed money and credit creation thrown at the problem. Rather than “fixing” the system, the “solution” did nothing more than add gasoline on the underlying fire.
Someone asked me yesterday what triggered the sell-off in tech stocks in early 2000. I said, “the market started to shit the bed for no specific reason other than it stopped going higher and decided to go south. The Fed jawboning was not nearly as pervasive although Greenspan was good at ‘talking’ stocks higher. The President then never cheered on the stock market like Trump does. At some point, no one can for sure when, this stock market is going tip-over – it’s just a matter of time…”
***Dave from Dnever
Dave from Denver=The melt-up in the chip stocks and unicorns is stunningly similar to the melt-up in the same chip stocks and the dot.coms in late 1999/early 2000.-Someone asked me yesterday what triggered the sell-off in tech stocks in early 2000. I said, “the market started to shit the bed for no specific reason other than it stopped going higher and decided to go south
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