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1) My 2021 bull thesis
Fed has said they see zero rates through 2023
M1 money supply is at all-time highs; however, the velocity of M1 money is near all-time lows, declining since 2008
Until velocity of money picks up, we're unlikely to see meaningful inflation anytime soon
Fed has said they see zero rates through 2023
M1 money supply is at all-time highs; however, the velocity of M1 money is near all-time lows, declining since 2008
Until velocity of money picks up, we're unlikely to see meaningful inflation anytime soon
2) The velocity of money is unlikely to increase until the economy fully reopens, which could take nearly all of 2021
Will the events of 2020 cause this to be the frugal decade, where people save and invest or will it be like the roaring 20s?
If the former, VoM could remain low
Will the events of 2020 cause this to be the frugal decade, where people save and invest or will it be like the roaring 20s?
If the former, VoM could remain low
3) With high liquidity, low alternative yields, low FFR and little to no inflation (due to low velocity of money) in the short to medium term, this market is likely heading higher
4) As long as inflation doesn't show its face (unlikely until we see how people spend in the reopening), rates will remain low and equities should keep climbing.
Adjusted for interest rates, equity valuations still trade below historical averages despite all the bubble talk
Adjusted for interest rates, equity valuations still trade below historical averages despite all the bubble talk
5) During the pandemic, the velocity of money has fallen 42%
To match that fall, we could likely print another $3-5T before seeing inflation if VoM remains at or below today's level
To match that fall, we could likely print another $3-5T before seeing inflation if VoM remains at or below today's level
6) If consumers come out of the pandemic and spend like crazy on goods & services, circulating their money around, emptying what they saved & invested during 2020
Then the VoM will increase sharply, GDP will soar, and inflation will come out with a vengeance
Then the VoM will increase sharply, GDP will soar, and inflation will come out with a vengeance
7) The Fed would be forced to hike rates to counter it, and this equity bubble that has been propped up by liquidity and low rates would likely pop
Either way, this is something we'll find out in 2023-2024 imo
Until then, the bull market continues
Either way, this is something we'll find out in 2023-2024 imo
Until then, the bull market continues
