SH, stocks are commodities in the so-called stock market. As such, prices are determined by demand and supply, no more no less. When demand exceeds supply, prices go up, the other way around, prices go down. Take at look at the resources and the components that make up the demand side of the equation.
Ten years ago, total value in stock funds were $310 billion, today, $4 trillion.
Ten years ago, only 20% of U.S. households own stocks or stock mutual funds. Today, 50% do.
Today, people have the highest wages and income ever. Although the economy is slowing down, GDP and productivity are at their highest levels in the U.S. history. Drawing analogy between this economy to Japan and Nikkei is comparing apples to oranges. The differences are vast, like days and nights. When I got time I'll address that issue.
Today, the cash sitting in money market funds is highest ever, at $2 trillion. People who preferred the safe and pretty attractive interest rates saw their interest income dropped 20% within the past month, and will continue to decline in the months ahead. I'd be surprised if we don't see a good portion of that money migrating back into equity at current levels. As I see it, the resources of what make up the demand side have not diminished much. Sure the bubble last year must burst, and it did. It was ridiculous then to think the markets can only straight up and it's just as ridiculous now to think the Naz will go straight down.
Regards,
Tom |
