TINA Rules

[The Rabbi]

Here is what you need to know about the stock market:

The market is governed by TINA--there is no alternative. There are no attractive investments out there to compete with stocks in this zero interest rate environment. Even a stock yielding 2% will be a better buy than most bonds.
That will last until the Fed raises rates. Which is never. The fed has painted itself into a corner. The Treasury has increased debt so much the debt is only serviceable at very low interest rates. Increase rates back to a normal 5% for the 10 year and the debt service will wipe out the federal budget.
So the Fed is stuck with low rates, which eventually will yield high inflation. Stocks can be a hedge against that (although in the 1970s they didnt do very well at it). But high inflation is actually what they want. So expect more of it. And stick with stocks but try to avoid inflation-sensitive sectors like utilities.

 

[justinacolmena]

The market is governed by TINA--there is no alternative. There are no attractive investments out there to compete with stocks in this zero interest rate environment. Even a stock yielding 2% will be a better buy than most bonds.
That will last until the Fed raises rates. Which is never. The fed has painted itself into a corner.

So are you advising corporations to borrow and spend themselves deep in debt with all that cheap money on the bond market?

 

[The Rabbi]

The market is governed by TINA--there is no alternative. There are no attractive investments out there to compete with stocks in this zero interest rate environment. Even a stock yielding 2% will be a better buy than most bonds.
That will last until the Fed raises rates. Which is never. The fed has painted itself into a corner.

So are you advising corporations to borrow and spend themselves deep in debt with all that cheap money on the bond market?

They don't need any encouragement from me to do that.
If they can borrow money at close to zero and invest it in something that produces a 3% return, they will make money with all the leverage. Thats why everyone is rushing to float bond issues now.