Gee, We Better Get Asset Prices Up!
Do you know what a POLICY RESPONSE is? It is free money given to banks and used to buy (inflate) assets to combat deflation.
Just take a minute to think about this clearly. What Central Banks want are higher prices in order to prevent lower prices.
Imagine if you went to the supermarket and milk, which is usually $3 and is now $5. And the sign says “On Special for this Week Only”. Would you be in a hurry to buy the milk?
That is what you are doing if you chase a market bolstered, levitated, inflated by the Central Bank POLICY RESPONSE of free money. Only a stupid asshole would clamor to buy. Right?
If you are an individual investor, should you “Just Trade Price” and chase the artificially induced rally because it is going up? How high will inflated prices go? How long will they be inflated? No amount of analysis will suffice. Few have that kind of information, unless you get a call from Washington a day before POLICY RESPONSE is announced.
Sure, going into this week, markets were very oversold and we were due for a sharp bounce. Markets made back all that was lost since early in May in just two days. Historically, that kind of action is clearly one of a Bear Market. But with free money, who knows.
My advice in buying the great European companies with big yields still holds true. And owning cheap and unique franchises does too. But don’t be a sheep for they will be slaughtered.