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Zero Interest Rates & Infinite Valuation Levels (Weekly Update)

Well, this is getting rather entertaining. Here is how I would describe the state of the US/Global economy in real terms. 

The US Economy is like a Boeing 737 Max. The geniuses who have designed it are mostly all on board and partying hard. Captain Trump just maxed out the throttle with corporate tax cuts (mostly channeled into stock buybacks), massive/historic deficit spending, back to zero interest rates promises and who could forget…….a lot of BS.

The issue is, the plane is flying straight into a massive mountain and is way too heavy to get over it. 

Of course, the biggest news over the last few weeks had to do with the FED and Mr. Powell turning into a full on “Dove”.  To most traders out there that means interest rates eventually going back to zero or below, QE, etc…..  Hence, the party can continue and the rally we saw off of May lows is very much justified. 

Indeed, the time to load up on call options might be at hand. After all, even Warren Buffett has suggested in the past that stocks deserve infinite valuations if interest rates are at zero (Google it). 

Here, however, lies the biggest issue. Just because interest rates being at zero fueled the current bubble, doesn’t mean them going back to zero will continue the trajectory. For all we know, the bubble might eventually collapse under its own weight. 

And YES, I have prove. Here is the chart of Nikkei 225 (with interest rates below 1% since 1995). 

So, should you prepare for the worst bear market in human history, as some prominent bears have suggested -OR- should you be stuffing your brokerage account with all sorts of call options?

Well, if you would like to find out what the stock market will do next, based on our timing and mathematical work, in both price and time, please Click Here

This Week’s Journal consists of the following topics 

Finally, you don’t have to guess what the stock market will do next under today’s extreme conditions. If you would like to find out exactly what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here.

Please Note: Our latest call was a direct hit. While everyone was panicking our work projected an important bottom on December 27th (+/- 1 trading day) on the Dow at 21,725 (+/- 50 points). An actual bottom was put in place on December 26th at 21,713.