I was a futures trader. The main reasons for equity markets trading at the levels they are at now are:
QE keeping interest rates artificially depressed, leading to: a) corporations buying back their own shares as a means to ensure cheap money available to them in the future, when interest rates climb -- they just release their own shares back into the markets, and, b) low interest rates have allowed institutional traders to place massive bets on margin, with little of their own capital at risk.
Lax rules at the major exchanges allowing trading of outstanding shares many, many multiples of amounts greater than are physically available.
Advent of ETFs, with no regulation. Index ETFs have to allocate their holdings in exact proportion to the balancing in the actual indexes...S&P, Dow, NASDAQ, etc. This creates a demand for stocks that normally are dogs and aren't worth owning, driving prices even further. Also, as in 2) above, these ETFs are holding shares that aren't even available for ownership, because there aren't physical numbers of those shares in existence.
The situation in the equity markets is much, much worse than the media, brokers, and banks are letting on. This has gone so much further than reasonable trading that it can only be criminal.
Based upon my analysis of the markets, they are overvalued by a factor of at least two, and I'm only talking about the indexes. That means the Dow, under the current financials and government data, should be trading in the range of 15 to 17,000. The FAANG stocks? They are so ridiculously overvalued it's now impossible to put a correct valuation on them.
I was a futures trader. The main reasons for equity markets trading at the levels they are at now are:
QE keeping interest rates artificially depressed, leading to: a) corporations buying back their own shares as a means to ensure cheap money available to them in the future, when interest rates climb -- they just release their own shares back into the markets, and, b) low interest rates have allowed institutional traders to place massive bets on margin, with little of their own capital at risk.
Lax rules at the major exchanges allowing trading of outstanding shares many, many multiples of amounts greater than are physically available.
Advent of ETFs, with no regulation. Index ETFs have to allocate their holdings in exact proportion to the balancing in the actual indexes...S&P, Dow, NASDAQ, etc. This creates a demand for stocks that normally are dogs and aren't worth owning, driving prices even further. Also, as in 2) above, these ETFs are holding shares that aren't even available for ownership, because there aren't physical numbers of those shares in existence.
The situation in the equity markets is much, much worse than the media, brokers, and banks are letting on. This has gone so much further than reasonable trading that it can only be criminal.
Based upon my analysis of the markets, they are overvalued by a factor of at least two, and I'm only talking about the indexes. That means the Dow, under the current financials and government data, should be trading in the range of 15 to 17,000. The FAANG stocks? They are so ridiculously overvalued it's now impossible to put a correct valuation on them.