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|From the Desk of Michael McDaniel|
|(10/30/2013) Trusting the Market at an All-Time High
Lately, the stock market (as measured by the S & P 500 or Russell 3000 indexes) has been making a habit of hitting new ALL-TIME highs. How can we be hitting all-time highs when the economic conditions around the world (US included) are so poor?
It is my opinion that the stock market is at a high due to the US Federal Reserve. For the past few years the Federal Reserve has been monetizing $85,000,000,000 EACH MONTH in debt to prop up the markets. Simply put this means that they have been printing money and buying assets to the tune of $85 Billion each month. They now hold $3,839,033,000,000 (almost $4 TRILLION) in assets. Think about the consequences IF they ever sell those assets.
Think about the consequences IF they continue to monetize our country’s debt at this pace.
I think investors are left with no other choice but to try to capitalize on stock market gains; until the bubble pops.
For several months I have been positioned to take advantage of some of this Fed induced rally while acknowledging that the stock market is in ‘bubble territory’- where investors take the stairs up and the elevator (or window) down.
I have no idea how long this Fed created bubble will continue to translate into new all-time stock market highs; could be days, weeks or even years. It will not end well for complacent investors.
I believe we can continue to make money while respecting this bubble.
My goal remains the same: make some money on this Fed induced rally while having a strategy that won’t get clobbered (technical term) when the bubble pops.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
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