Entering text into the input field will update the search result below

Why stock market rises that much?

Jan. 17, 2011 5:12 PM ET
Tony Pow profile picture
Tony Pow's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The economy shows some improvements, but not that much for the market to rise more than 20% in such a short time. Europe and China have their own problems, so the global recovery is not smooth to say the least.

It could be our money printing machine is at its max. When you print that much money, everything including commodities, oil, food (hopefully temporarily due to the current drought and flood), precious metals, stocks in our case would rise not in real value but relative to a depreciating currency.

US dollar is the only reserve currency. When China buys oil, they have to convert the Yuan to USD. US has a free hand to print money and becomes the world's chief currency manipulator.

It cannot last for ever. Most likely the followings will happen.

China and other nations will use a different reserve currency other than USD. No suckers will buy US government debts as they will not be paid back. USD will depreciate for real this time. Getting out of the debt by depreciating will not fool the lender the second, and the third time.

It could be the perfect storm: depreciated currency, no takers for the debts, HIGH inflation... It could take us back to another recession. I hope I'm all wrong and/or the government has better tricks under the sleeve instead of printing money. Hopefully we'll NOT have a QE3 or QEn to keep inflation tamed. However, politicans will find way to spend and override the debt ceiling. The low interest rate should be continue for a while to help businesses and investors.

It could be very damaging to hold cash now if the above is correct.

The rise of the market could be due to the banks playing the market with the stimulus money which is supposed to lend to businesses. The flow from bonds esp. muni to the stock market could be a factor too.

Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.