Today's rally - expected and predictable


Almost all markets skyrocketed today after the new and the same rumors that interest rates will remain low for a long time. In fact, nothing new happened. The decision of low interest rates is announced years ago and is confirmed almost every week. There is a long term promise (till 2014) of not increasing the interest rates. So the markets know almost everything about the money supply. And know also that FED does not have other choice, as increasing interests will default the extremely indebted US government. So the markets knew for a long time that the interest rates will remain low, and that there is a decisive factor that guarantees their level.
So is the new and the same rumor the reason of today's rally?
Absolutely no...
In fact the markets are over flooded with liquidity and will continue to be flooded more on future. This is what the low interest rates mean. All this money must go somewhere so the bull-result on the markets is expected. When all investors have more and more money, and the assets are almost fixed quantity, it is absolutely logical the prices to go up. It is called also "inflation" or "pumping bubbles". But it is all and the same - the value of assets measured in constantly inflated money is going up.
So the new rumor is just a media explanation of what is happening. But behind the scene there are fundamental factors that will pump all markets up. That is the way of helping the White House to repay its loans. The loans are almost fixed, while all other prices go up. That is the inflationary decision and on financial markets inflation is equal to a bull-rally...
The markets are going up not because of the rumors. There was and there will be much other rallies - even at moments with no low-interest-rumors. Then the explanation is something other... But the real truth is one and the same - it is not a question of making the assets more expensive. It is a question of making the money cheaper. Higher prices mean nothing if all prices of all assets are up. You will buy the same quality of oil with the same quality of gold. Nothing changes. Just the dollar is losing its value taxing this way the savings in favor of the Treasury.
Much more rallies are to appear this year. And every next year...


Interesting sites: Добри Божилов