What is fueling the S&P's growth?

[lawrence-lugar]

What is fueling the S&P's growth?

So much for that big Correction that everyone's been saying will happen for the past four years or so.
The market can stay irrational...longer than you can stay solvent.

Whether you're a day trader, or a longer term investor...the marketplace is part art, part science.

 

[Stockmarketmap]

It's productive to diversify across asset classes / stock universes and empirically based, non discretionary strategies. Sometimes there's a dry spell ...


- Don't quit your day job
- Don't use leverage
- Open a Roth IRA
- Sometimes money is made by sitting in cash
- Don't be a hostage to the markets
- let the markets, profitability of the U.S. economy work for you

 

[DaFerg]

Peter Schiff is a great guy to listen too as well. Quite intelligent and he's foreseen a number of economic events, including 2008. He's got some books out, and lots of videos on Youtube. You should check him out.

 

[DaFerg]

What is fueling the S&P's growth?

So much for that big Correction that everyone's been saying will happen for the past four years or so.
The market can stay irrational...longer than you can stay solvent.

Whether you're a day trader, or a longer term investor...the marketplace is part art, part science.

Amen.

 

[J_Smith]

What is fueling the S&P's growth?

So much for that big Correction that everyone's been saying will happen for the past four years or so.
The market can stay irrational...longer than you can stay solvent.

Whether you're a day trader, or a longer term investor...the marketplace is part art, part science.

Can you explain, with examples, what you mean by part "art" and part "science".

I will check out the video later and contribute to the discussion.

Does anyone have any "data" to back up statements - as without data the statements are meaningless.

One poster mentioned how much debt the banks have - does anyone have data, or link to same, to show the figures?

J_S

 

[J_Smith]

I stare at the S&P on my screen (SPY), almost in disbelief. It has almost tripled since the crash in 2009, and has more than doubled since a lull in 2011. What is fueling this growth? Have there been advances anywhere, that have increased value to this extent? It makes no sense to me.

After some reading around, the big arrow points to interest rates being held at near-zero levels. This makes money very cheap to acquire, and so it pays to borrow at low rates, and invest. Isn't this exactly what happened before the crash in 2007? The Japanese Yen could be borrowed very cheaply. When the rates spiked up, it was one big margin call. It looks like another big bubble to me.

As former President Bill Clinton said, "It's the economy, stupid." Do the Dems fear that they'll get voted out if the economy goes south? Is President Obama working to keep the interest rates low, so that the S&P continues to happily move up?

Is there any way to see how deeply the banks are leveraged? How much have they borrowed? How deep in are they?

Back to your question.

If you want to see what is driving the SP500 the most, then it makes sense to look at it's components, and hone in on the major parts that are causing the greatest movement.

Does this make sense!

The underlying reasons as to why the particular stocks are moving more than others can then be investigated, but you must first identify the race with the best odds, before you go backing the horses.

Think of the Grand National compared to a 5 or 6 horse race!

The video is good, but it will not help you make any money trading - to do that requires time and effort, along with sufficient capital.

So, who wants to step up and post some data in relation to what is driving the SP500 the most - the data is there for all, it just requires some time and effort as mentioned!

J_S

 

[kmiklas]

After much thought, here's my opinion:

Election year. No way in h3ll that the Dems are letting the S&P tank 4 months before the election.

Details:

1. It is an election year
2. The Dems want to win
3. The Clintons are running
4. You young whippersnappers might not remember Slick Willie back in 1992: "It's the economy, stupid!"
5. An economic crash means a loss for the Dems.
6. There's no way in h3ll that the Dems are going to let the S&P tank a few months before the election
7. Any big downturns in the market are quickly remedied with massive buy orders; artificially created demand
8. Where's the money coming from? They've got a cool 3.5T (Trillion) from the Quantitative Easing program.
9. There is an understanding in place between the Dems and the banks that the S&P shall continue to rise on a nice even upward trajectory.
10. This also explains how the S&P seems to be "magically" growing, despite minimal innovation and growth.

So, expect a bull market for the next few months.

After the election, it's every man for himself. Perhaps time to short.

Q.E.D.

 

[i960]

1. Buybacks fueled by easy money (CB driven).
2. Outright purchasing of equities by central banks (CB driven).
3. Artificially floored interest rates forcing people to seek yield on risk assets (CB driven).

Get the point yet?

 

[piezoe]

I really like Dalio's presentation of Economics 101, as it were. I don't see how anyone can do better than that as a succinct summary. I have always objected to the term "printing" as a way of describing QE, but I don't object to Dalio's use, as he points out that the Fed uses the money they "printed" to buy assets. They don't use it to pay off government debt! But that was left unsaid.

I have had long discussions with folks here on ET regarding this very point, and it is why I would have preferred there to be a different word for the kind of money printing the Fed does in QE and the kind that, say, Germany did, or Zimbabwe did. Yes the Fed does create money in QE, but they do not create it out of nothing as the word printing implies. Instead, in QE, money is created out of credit (or debt if you prefer), not out of nothing. The process of creating money out of credit is a reversible process. And as Dalio points out, thank goodness, when the debt associated with the credit is paid off, both the associated asset and liability disappear. On the other hand when the other kind of printing is done, and the "printed" money is used to pay off debt, Zimbabwe style, rather than buy assets Fed style, the process is not reversible and the money created stays permanently in circulation. I wish that economists, at the least, would stop referring to QE as printing. But at least Dalio followed up "printing" with buying assets in the form of debt instruments (Treasuries and CDOs). There is a big difference between that and using the newly created money to pay down government debt.

Naturally, to the extent that Fed action results in inflation, there is some monetization of fixed interest debt. I think that's what Lord Skidelsky was referring to when he said those who own the debt, pay the debt. And that is of course one mechanism through which subtle wealth redistribution can operate.

 

[piezoe]

Outright purchasing of equities by central banks (CB driven).

The U.S. Central bank does not buy equities. During the 2008 crisis they facilitated Treasury acquisition of equities. But any equities temporarily acquired by the Fed were immediately transferred to the Treasury.