Bernanke Creating the Hoover Damn - DOW 100,000?
The next three months are going to be absolutely fascinating on the stock market. The dollar's advance may continue as the velocity of money continues to grind to a halt. Banks aren't lending because they are either storing the money in their vaults to get their reserve ratios up to regulation OR their buying treasury's to make an easy 3.5% on the taxpayers backs.
Bernanke doesn't have too many options yet, and the dollar is strengthening because less are in circulation. So he'll keep interest rates at zero and possibly rec'd Congress add another stimulus plan in early 2010.
Picture a damn full of money, with the taxpayers below. Not enough is flowing out, so to increase money to us, Bernanks lowers the interest rates. But instead of more money flowing out, he's only getting a trickle more - not enough to get the velocity of money moving at the rate he thinks is appropriate. With interest rates at zero, he knows the only way he can get money out of the damn is to print so much it just flows over the top. His goal is to stop printing and reduce the amount of money once the economy starts moving again, but he has two HUGE problems. One, inflation may get out of control before jobs are created. Or two, the damn can burst as banks realize the party is over on treasury's and begin buying more stocks. This will then drive up prices of the market, but not based on fundamentals. Then the traders will pocket the profits and only a select few Americans/foreigners will make lots of money. This could pretty much create the biggest bubble we've ever seen.
IMO, don't even think about shorting this market. It might not be worth 1 oz of gold in ten years, but an oz of gold might be worth $100,000. DOW 100,000, here we come.