Corporate earnings, despite the dip in energy prices that preceded the rise, have been flat. So is production.
Yet stocks are rising on what some claim is a projected PE multiple (over bonds), i.e., they think interest rates will fall and somehow that will occur as earnings are retained, i.e., they are expecting a return to quantitative easing.
To me the math doesn't add up. PE for the S&P is in the mid-20s while long rates are nearly 4%. How will earnings increase with striking workers and other labor pressures, such as soaring healthcare costs and training people with no skills who might not even speak English?
The market is behaving as if long bonds should be at pre-pandemic levels. Think about how far short rates would have to fall, to drive a growing economy, for this to be true. Seems like a euphoric pipe dream. Very risky for retirees to play this game, but I can see why it is occurring. Most investors were not around the last time it made sense to hold cash (1970s and early 80s). They have been trained to believe that the government can always borrow more money for QE without paying the cost.
Someone tell me why the 1970s won't repeat itself. Tell me why OPEC loves us and will not restrict production now that America thinks it can run on batteries powered with windmills.
Yet stocks are rising on what some claim is a projected PE multiple (over bonds), i.e., they think interest rates will fall and somehow that will occur as earnings are retained, i.e., they are expecting a return to quantitative easing.
To me the math doesn't add up. PE for the S&P is in the mid-20s while long rates are nearly 4%. How will earnings increase with striking workers and other labor pressures, such as soaring healthcare costs and training people with no skills who might not even speak English?
The market is behaving as if long bonds should be at pre-pandemic levels. Think about how far short rates would have to fall, to drive a growing economy, for this to be true. Seems like a euphoric pipe dream. Very risky for retirees to play this game, but I can see why it is occurring. Most investors were not around the last time it made sense to hold cash (1970s and early 80s). They have been trained to believe that the government can always borrow more money for QE without paying the cost.
Someone tell me why the 1970s won't repeat itself. Tell me why OPEC loves us and will not restrict production now that America thinks it can run on batteries powered with windmills.
