In the 2010s a new finance acronym made its entrance—TINA.
There is no alternative
This wasn't an early Bitcoin maxi stance, but a crass realization that savings had to go into stocks. Bank accounts paid zero, bonds traded at around (or even below!) zero, and central banks were printing like mayhem.
There was nowhere for surplus funds to go but stonks.
A plandemic, an inflation crisis and energy crisis later, plus orange man on the throne, with much higher rates, squeaking growth and fiscal and economic forecasts that look even more dire than last time orange man was in charge... we're still, somehow, in the same boat.
The mystery of the moment is why rampant speculation persists in the all-American bull market despite the apparent end of easy money. The exuberance was understandable when money was virtually free, but that was last decade. (#887642)
In the FT last week, Ruchir Sharma reflects on the many ways that America's financial markets remain broken—or at least supported by an indefinite stock market put: the one market "that the government allows to move in only one direction: up. With the economy strong and supported by the state, the US business bankruptcy rate is close to record lows (outside the pandemic)."
To keep growth alive during the pandemic, the Fed injected massive amounts of liquidity into the system. By some measures a lot of it is still coursing through the markets. Government spending stayed elevated well after Covid passed, leaving more cash in the hands of households and corporations. They, in turn, have invested heavily in stocks (or stock buybacks), confident that the state will mitigate losses.
How is this all going to unfold?
One way is that the price of money rises further, prompted possibly by higher inflation. Another is that a fiscal crisis or some other shock leaves the government unable to afford such generous bailouts and rescues. Until then, BTFD will remain the mantra for most investors.
One way or the other, this Everything Bubble will unwind. Maybe runaway inflation, Sharma says; maybe fiscal crisis.
How's that for a bout of optimism this otherwise fine morning?!
non-paywalled here: https://archive.md/Ervma