There’s a forthcoming crisis developing. Stocks have run up over the last five years to new highs. Many find this cause for celebration…we find it cause for alarm.
Somewhere along their travels, stocks drifted out of orbit from the real economy. In short, the economy reclined while the stock market boomed. Of course, no one quite knows what’s going to happen next.
Stocks could continue to rise. They could drift sideways. Or they could slowly slide down from their highs. But like an out of control satellite we have a feeling stocks could very quickly burn up and disintegrate.
The conventional wisdom from Wall Street is that with the Fed still goosing the markets with $55 billion a month and a federal funds rate at practically zero the market will remain inflated. Prices can’t dramatically fall, goes the popular delusion. Naturally, we have some reservations.
We understand the logic and the massive put the Fed has under the market. Continue reading
