Stocks Continue Uptrend Towards Bubble

Published by City Blaster on Tue, 12/03/2013 - 11:45 in
low mortgage rates 3%

Daily Market Commentary for March 12: Another day, another rise! Nothing stops the Dow. Investors continue to add to the already huge bubble and markets rose without any supporting data. This will end badly most certainly as it did in the past, but not for now.

Optimism has grown to such an extent that investors simply don’t care with bad news, valuations, tax hikes or cuts on Medicare or Medicaid. Everything seems fine in the US, and there’s only one direction the stock market can follow and that is North. As shown on the last US household report released a few days ago by the Federal Reserve, US Households net worth has just risen to $66.1 trillion, just a tad below their record level seen prior to the financial crisis, in Q3 2007. Households are holding too much financial assets, which increased 27% between 2008 and 2012 mostly due to the never-ending QE policy.

While the bubble continues being inflated in the US, investors in Europe have been much more careful. European equities aren’t rising as investors need time to wait for developments coming from Italy. No one knows what Beppe Grillo can do and what exactly that means for Italy and Europe. But against the desires of Merkel and Barroso to eternise austerity, many voices are now against it and sooner or later they will put an end to it. Austerity was a major failure and needs to be reverted as soon as possible. 

Speaking of austerity, it is time for Osborne to rethink about the best policy to put the UK on the right path to growth. Early in the morning industrial production was reported dropping much more than expected, adding another blow on the effectiveness of the coalition policy to end the crisis.

For now I don’t have the guts to go against the crowd. Let’s continue to hold equities and, if possible, buy a house at a fixed rate for 30y. In the US you can get one at rates just a little above 3%. That’s free money. Take it while it lasts!