I (Still) Think Stocks Go Higher… A Wall of Money vs a Wall Of Skepticism. The Money Wins…

The last few days of selling notwithstanding, I think the market is more likely to  “melt up.”  Past its prior highs and up to Lord knows where.

As that last phrase implies, I don’t think “valuation” per se is the main driver.  Or even a useful way to think about it.  Per prior pieces, its pretty hard to figure out a “fair” value for anything in a world of negative interest rates (getting paid to borrow).  The only certainty is that past analogues, patterns, and rules of thumb are useless.  They depend on a positive rates dynamic that doesn’t currently exist.

So we are left stumbling along in a foggy world where North has shifted  to someplace unknown on the compass rose.  That dead reckoning and inference are deeply discomforting.  But its smarter than seeking comfort from a map that is guaranteed to yield garbage coordinates.

So why do we go higher?  Because the money has to go someplace.

Fighting that wall of money is a wall of skepticism.  It is dressed up in a lot of reasonable sounding arguments about valuation and ya ya ya.  But much of that “analysis” is just recycling the past to avoid facing a discomforting future.  They are navigating off maps where North is still where it “should” be.  And/or shouting loudly for the gods (ie the Fed) to move North back to its normal place.  Anything to avoid facing the reality of uncharted waters.

I think the wall of money will win.  And Lord knows where we end up.  There is probably a very ugly reckoning ahead somewhere.  But only after the skeptics become enthusiasts…

Anyway.  Going camping in the Sierras this weekend.  At least the maps still orient to North out there…. 🙂

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