Now What

The observations regarding the peculiar combination of financial markets events didn’t start yesterday, or the day before. We’ve been tracking all the back to Q1, 2021, when the combinations started reacting oddly. There has been a LOT of time to adjust. A LOT.

But, since the incorrect happy talk ruled the day, and people don’t understand how much bigger and more important the denominator is (the reason for my “Stocks For Show, Bonds For Dough” slogan), largely ignored.

There is NO financial formula regarding price or valuation without “r,” which has been either straight down AND not volatile, for decades. Even this formula isn’t precisely correct, because around C(1), C(2), etc and underneath each 1+r, there needed to be the word “Expected.” It’s a significant omission.

Estimating C is difficult and full of Monday-Morning Quarterbacking, and other flag-waving in the media on your 10 shares of TSLA. Estimating 1+r is boring and misunderstood…and influenced/determined by the largest holders of financial interests on the planet. Federal Reserve, PBOC, BOJ, BOE, ECB, SNB, Norway Oil Fund, Singapore GIC: they do not care about your 10 shares of TSLA or Joe Stock Picker’s message of “stocks in the long run.” Nor should they, they have bigger fish to fry (and wars to fight, which sit under the surface).

In public, I mentioned the fact that people hadn’t fully taken inflation (a component of interest rates) into account.

Now, Mr. Market is doing it for you.