Wednesday, November 02, 2016

Low Interest Rates 
& Monetary Stimulus Support
Are Driving Financial Markets Higher
"Current valuations cannot be 'justified' simply by appealing to low interest rates. To see this, we can think about the response of risky securities to Fed-suppressed interest rates as having a 'justified' component and a 'speculative yield-seeking' component .. In U.S. and Japanese data that central-bank easing actually supports the financial markets only when investors are already inclined to speculate .. Low short-term interest rates reliably encourage investors to 'reach for yield' in more speculative investments only when investors quietly rule out the potential for capital losses, or at least assume that any loss will be quickly recovered .. Presently, deteriorating market internals across a broad range of individual securities, industries, sectors, and security types continue to signal a shift toward increasing risk-aversion among investors."
- John Hussman
LINK HERE to the essay

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