Stock market seem like a balloon getting inflated by central banks. Everytime it gets negative. They pump new air in it. FED, BCE, BOE and BOJ are decisive in keeping the balloon up in the air.
Latest pump was made yesterday by the BOE.
The Bank of England cut its benchmark interest rate to the lowest in its 322-year history
http://www.wsj.com/articles/bank-of-engl...1470309155
At this moment central banks are the decisive fundamental. The only thing which can stop this ponzi is inflation. As long as economy is shit. Central banks will buy corporate bonds. With the money from the bonds selling. Companies do buybacks. And the wheel keeps turning. Supposedly the music would stop the moment companies are not be able to service the debt. But central banks can keep the music playing. By refinancing the debt.
This is not a bad scheme. Inflation could stop this. But if there´s inflation probably it means economy is picking up. Which is good.
One problem will be if the gap between the real economy and the artificial one widens to an unbearable point. And you can have massive unemployment and historical wall street highs at the same time.
The problem isn´t central banks cutting rates or QE. As a temporary solution it´s viable. But this measures only buys time. Which is good. It doesn´t fix shit. Debt is not a profit multiplier.
If FED never raises interest rates. It will mean you need debt to fuel economy. But debt is artificial. It doesn´t create wealth neither is a profit multiplier.
For FED not raise rates. It means companies cannot stand alone by themselves and need the crutch of debt. For this to happen the economy must be shit. Reason why companies need massive cheap debt instead of profits.
FED will have to raise rates, because otherwise this would mean economy would never pick up.
Latest pump was made yesterday by the BOE.
The Bank of England cut its benchmark interest rate to the lowest in its 322-year history
http://www.wsj.com/articles/bank-of-engl...1470309155
At this moment central banks are the decisive fundamental. The only thing which can stop this ponzi is inflation. As long as economy is shit. Central banks will buy corporate bonds. With the money from the bonds selling. Companies do buybacks. And the wheel keeps turning. Supposedly the music would stop the moment companies are not be able to service the debt. But central banks can keep the music playing. By refinancing the debt.
This is not a bad scheme. Inflation could stop this. But if there´s inflation probably it means economy is picking up. Which is good.
One problem will be if the gap between the real economy and the artificial one widens to an unbearable point. And you can have massive unemployment and historical wall street highs at the same time.
The problem isn´t central banks cutting rates or QE. As a temporary solution it´s viable. But this measures only buys time. Which is good. It doesn´t fix shit. Debt is not a profit multiplier.
If FED never raises interest rates. It will mean you need debt to fuel economy. But debt is artificial. It doesn´t create wealth neither is a profit multiplier.
For FED not raise rates. It means companies cannot stand alone by themselves and need the crutch of debt. For this to happen the economy must be shit. Reason why companies need massive cheap debt instead of profits.
FED will have to raise rates, because otherwise this would mean economy would never pick up.