I'm not throwing in the towel, but rather walking away in disgust.
The news just flashed by squawking that the Dow Jones Industrial Average hit a record high again. This is the 32nd record high for this year.
The thought was that with quantitative easing coming to an end in October, and the Federal Reserve not printing additional cash, we would finally see some rationality in the stock markets. So far that has not happened. No matter what the news is, the Teflon-coated market shrugs off the bad news and keeps climbing.
The drop in oil prices is an incredible event this year. Not many people saw that coming. While that is good news for the average person as he sees his fuel bill drop, we can all expect it to be somewhat temporary. It is also driven by political ambitions where OPEC wants to crush the U.S. shale oil boom. The big bully the U.S. is, it will not stand by and will do everything in its means to raise the price of oil now. The financial prowess and shenanigans that the U.S. can conjure up will take care of that.
This temporary respite is driving stocks up as Black Friday news is not even digested but the season is being called a full-blown victory.
The rise of the U.S. dollar is the second big surprise of the year. Once again most analysts did not predict this or the extent of it. The collapse of the euro has been nothing short of spectacular. The corruption of the European Central Bank (ECB) from its disciplined stance of not repeating the mistakes of the Feds or the Japanese has led to this downfall. With the announcement of "doing what it takes," the ECB has crushed the euro and most major currencies of the world and as a consequence, the U.S. dollar appears to be the tallest midget in the room.
This has led to the stock market rise as we see more investors around the world selling their own currency and buying the U.S. dollar. Once they buy the currency, they want to invest it and nothing better than to enhance their U.S. dollar gain by investing the U.S. stock markets.
The problem with this whole strategy is that it can be called hot money. Once the tables turn and the U.S. dollar declines or oil prices come back up, there will be a very sharp pullback and that might be the trigger of the collapse that many informed investors are waiting for.
Unfortunately, I do not see that happening any time soon. The European continent will stagnate for at least one more year. China will not be creating waves of massive growth beyond the promised 7 percent if it can keep up the charade. Japan is already in recession and will likely remain there all of next year. Russia and Brazil will continue to flounder. India and Thailand will likely be shining stars, but small ones on the world stage.
The focus on fundamentals in the U.S. is drowned out by the sea of liquidity, and, as a result, fundamentals don't seem to matter any more.
This is one prediction I would love to be wrong on, but do not believe the analysis to be flawed.
The lack of fundamentals is wrong, but then so are many other things. I suspect this insanity will continue despite it being wrong.
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