Following Powell’s recent capitulation to Wall Street and Washington in March this year, the financial cheerleaders are once again out in full force.
With the Fed’s sudden pivot to be “patient” on further rate hikes, it’s all “go-team-go!” for the sell-side media.
I just ran across a “breaking CNBC report” highlighting the results of an E-Trade survey.
It shows that more U.S. millionaires are turning bullish again.
Instead of the 44% bullish figure back in early Q1, today that percentage has risen to 66%.
Why the sudden “group optimism”?
The Fed handed Wall Street another long window of no-rate-hike “stimulus”.
Now, let the post 2008 debt party and market bubble rage on!
One Survey of Millionaires Can Boost Markets, But Can Only Hurt Every Day Investors
From one look at this graph, you can understand why I’m always both fascinated and sickened by how the Fed slowly became more important than facts for the majority of investors.
These surveyed millionaires are too near-sighted off the highs of our post-’08 “new normal” of seemingly endless and unlimited Fed “accommodation.”
With their cheap interest rate steroids, the Fed has literally become the driving force behind market faith and hence market direction.
This, folks, is a very dangerous “new normal.”
Today, rather than trade a stock market driven by natural price discovery and risk-awareness, we now have a Fed-controlled market driven by unnatural interest rate policies and risk-blindness.
I’ve written extensively about just how dangerous such blind faith in the Fed’s “magical powers” can be.
But if you want an even simpler explanation for the current markets, just think of a college keg party on spring break in the Bahamas.
That market party, and drunken optimism, can last as long as the free and cheap beer or low-rate “accommodation” keeps flowing.
For an informal look at the details, just check out my video link here.
It’s the same with drunken markets.
The Fed Won’t Let Investors Sober Up to the Truth
Despite even the most obvious signs of market over-valuation, such as price to EBITDA ratios which have surpassed even the record-breaking levels of the dot.com bubble (and subsequent 80% crash) of 2000, beer-goggle investing just rages on, totally blind to sober thinking and blunt facts like this.
But that’s what the frat-party Fed does.
Year after year of artificially suppressed rates is like a keg binge where the beer never stops flowing.
Even better, the moment the market starts to feel that all-too-familiar “queasy feeling,” the Fed sends it a fresh Bloody Mary (i.e. a “pause” in rate-hikes) and thus the hangover is delayed while the party rages on.
And that’s precisely what the Fed gave us in March-a little more “Hair of the Dog.”
But folks, there’s no such thing as keg party without a hangover.
The same is true of markets: The Fed can keep us record-high drunk for years, but the hangover ahead is gonna be an equal record-breaker.
Again, just watch the free video and see for yourselves.
Today, investors need a little more black coffee and little less market-beer.
Once sober, they will start to wise-up.
That’s what the millionaires who I advise are doing.
Unlike those in that CNBC survey, informed investors know the simplest rule in getting and staying rich: Buy at the bottom, not the top of a market.
So, let me ask you: does this market look like a top or a bottom?
Pretty simple, no?
Folks, be true to common sense, be informed, be market-sober, and be careful out there.
April 20 2019