Why speculators are still running wild when money is no longer free

Something even bigger than AI and the Trump effect is at work

One answer is that the easy money era ended only in part.

It had always rested on a growing web of government and central bank support including market rescues, corporate and bank bailouts, constant stimulus and, of course, record low rates. 

Only very low rates have gone away. The rest of the culture continues to backstop the basic faith of market speculators that nothing will be allowed to go wrong.

The longer the bull run lasts, the more investors feel emboldened to buy any dip.  

The market suffered brief setbacks on news of a serious Chinese challenge to American AI dominance and of Trump’s tariffs. 

Then retail investors rushed in to buy stocks like never before. 

Of the five biggest days for retail buying this decade, four erupted in the last five weeks.

To keep growth alive during the pandemic, the Fed injected massive amounts of liquidity into the system. By some measures a lot of it is still coursing through the markets. 

Government spending stayed elevated well after Covid passed, leaving more cash in the hands of households and corporations. 

They, in turn, have invested heavily in stocks (or stock buybacks), confident that the state will mitigate losses.

Short sellers, who bet that troubled stocks will fall, are a dying breed in a market that the government allows to move in only one direction: up.

Social media captures the speculative fervour as BTFD: “buy the f***ing dips”

Ruchir Sharma Financial Times 10 February 2025

https://www.ft.com/content/ec452f8e-f2ad-4c98-a150-9eff84b0c692

Det fördes länge en debatt om vilket M som skulle vara bäst för att förutse framtiden.

Själv har jag tänkt mig att hushåll och företag har en skattkista där överst finns kassa och bank, längre ner värdepapper, belåningsmöjligheter och fastigheter och längst ner "The Family Silver".

https://englundmacro.blogspot.com/2025/01/vad-ar-pengar-m1-m2-m3-osv-monetary.html

The market has loosened financial conditions

https://englundmacro.blogspot.com/2024/11/the-market-has-loosened-financial.html

Tillbaka till Rolfs länktips 10 Februari 2025

https://englundmacro.blogspot.com/2025/02/rolfs-lanktips-10-februari-2025.html