Hi Investor2; Re the overall bull market...
The bull market has long been in a bubble stage. It will not end, I think, until something truly horrible happens, (and I can't imagine what that thing would be) or until people are forced to begin selling stocks.
The thing that will eventually force the public to sell their AMZN, will be a substantial increase in the unemployment rate, and I don't see that as an obvious thing to happen this year.
A sequence of events that might cause an increase in unemployment, (a 3% increase should be enough) would be corporations trimming back work forces due to a combination of the lower dollar, and general world-wide over capacity.
I believe that the Federal Reserve is well aware of the danger, and is pumping the money supply about as hard as possible to avoid the danger. If you look at the recent money supply growth figures, they are pretty high, and money supply is way over the targets of a few years ago. So far, this has not caused inflation, due, no doubt, to the global deflation.
A table of monetary growth rates, of various types, back to '81:
(.pdf:) stls.frb.org
Note that M2 and M3 are increasing at 15% per year, which is the highest each has grown since 1983. MZM is pretty high at 20%, though it has been higher, but L is lagging. I think this is pretty clear evidence of the Fed fighting hard to keep things chugging along.
Another interesting article, which also supports what I am saying regarding the inclination of the consumer to continue buying stock, is this one:
Is Household Debt Too High?
Another potential explanation for rising debt ratios is that households may borrow more for current consumption purposes when their wealth rises rapidly.
(.pdf:) stls.frb.org
My guess is that inflation really isn't a big danger to our economy. The big danger is an increase in the unemployment rate. I think the Federal Reserve sees this the same way I do.
-- Carl |
