Value, What A Concept!

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by Steven Sarnoff

Just a week after running over Ford, Tesla today overtook General Motors for the number one spot among US automakers for market value based on stock market capitalization.  Tesla’s drive higher has sparked renewed debate about the concept of value.

Differing opinions make markets. The financial media features many Wall Street analysts flouting Tesla’s share price rise, calling the stock clearly overvalued. Elon Musk, Tesla’s chief executive officer, couldn’t resist schadenfreude by trolling and throwing shade at short sellers with his, “Stormy weather in Shortville…” tweet.

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Will Shaky Support Give Way?

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by Steven Sarnoff

This morning, we are seeing support for stocks being tested.  As the Trump reflation trade loses air, will shaky support give way?  In my opinion, it will.

Following the election, the market was juiced on big bets that Trumponomic policies would boost US growth and inflation, hurting T-bond prices (lifting bond yields). Well, what have we seen? In the wake of Yellen and crew’s action on interest rates, GOP failure to reach a consensus and the abrupt end to health care legislation, and Mr. Trump’s rocky Beltway honeymoon, bond prices have been rising (yields falling). Continue reading

Are Central Banks About To Open The Monetary Spigots Even More?

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by Steven Sarnoff

In response to the 2007-2009 financial crisis, central banks opened up the monetary spigots.  They employed a creative strategy of QE (quantitative easing), the purchasing of financial assets as a way of creating new money in hopes of stimulating economic recovery and keeping the demon of deflation at bay, when their usual monetary policy tools were rendered ineffective.

The overall effectiveness of several rounds of QE as an economic stimulus is debatable.  What is clear is that ballooning central bank balance sheets have been a boost to asset prices. Since 2013, Japan has taken it to a new level. Continue reading