Machholz's Blog

By: Nadeem_Walayat

The stock market continues to soar with the Dow closing at 15,387, and the FTSE at 6803, my conclusion as of late March is that the current stage of the stocks rally underway was as a direct consequence of the Cyprus debacle that literally poured gasoline onto the stock market rally fire as for the first time Bank Depositors LOST money (stolen) and not just by a few percentage points, but in real life examples of as much as 85% of their bank balance being stolen. The rally was then further boosted to by the Japanese pouring rocket fuel onto  the fire through the policy of Hyper QE Inflation.

The Dow is Up 16% year to date and well above its preceding long standing old time high. The FTSE is Up 15% year to date and within 140 points of its 13 year old pre-dot com bust old time high.

Excerpts from my recent articles illustrate why -

09 May 2013 – Stock   Market Accelerates to Dow 15,105 New High – Fundamental Reasons Why

My interpretation for why the Stock Market is continuing to soar has it’s   basis in the twin forces at work which are –

a. The exponential Inflation mega-trend

b. The Cyprus bank deposits theft panic event that I wrote of in late March   that resulted in a fundamental shift in investor psychology as bank deposits   were now increasingly perceived as being of a similar risk to stock market   investments (31 Mar 2013 – Cyprus Bank Deposit’s   Theft Crisis Sparks Run to Stock Market Safe Haven ).

The flight into the stock market at its core represents   simple logic, the simplicity of which tends to be overlooked by   over-complicating diatribe regurgitating economists and journalists who tend to   attribute the rally to relief that the Cyprus crisis is not as bad as it could   have been, instead the simple logic is that if investors with funds parked in   banks are at the real risk of losing as much as 40% their funds in exchange for   a pittance in interest of usually less than 3% per annum (less than Inflation   after tax). Then is it not simple logic that dictates that investors should pull   their funds out of the banks and park them in SAFER dividend paying blue chip   stocks that despite having a similar downside risk i.e. 40% potential loss if   the markets crashed, but in exchange for that risk is an dividend income that   INCREASES each year PLUS potential of capital gains of probably between 20% to   50% per annum (depending on the individual stocks performance)…….

full article at source:http://www.marketoracle.co.uk/Article40550.html