Those who make good money in real estate fixing up house always want to operate in the best neighborhoods. Their goal is to buy the worst how in a good neighborhood. This increases their return substantially once the house is up to par.
Investors in all classes should be mindful of this.
Many are wondering why the United States markets are still forging ahead. To most this makes no sense in lieu of all the headwinds that are out there. While they are valid, we need to remember markets trade on emotions.
The debt level is of concern to many people. Again, while this is valid, it means nothing to the market. Right now, there is something far stronger driving these markets higher. Few are out there talking about it since it is not sexy or hard to place an agenda behind. However, it has driven markets for as long as markets have been around.
We are seeing massive run ups in the United States equities markets simply because of the flow of capital.
This is what is behind it all. Markets take off when money floods into them. At this point in time, everything that has to do with the United States is getting swallowed up on the international scene. The world investing community is saying the United States is the best neighborhood to be in.
What this means is that U.S. debt is being bought along with the USD getting stronger. The flight to safety is alive internationally.
Why is this?
Answer that question by deciding if you want to purchase German bonds? They are paying negative interest rates. Compared to that, the U.S. payout of 2% looks like a great return.
On the currency front, the world is stockpiling dollars. Would you really want to be holding the Japanese Yen right now? Or even worse, the Chinese Yuan?
None of this is a proclamation that the United States is operating on a strong foundation. There are a lot of holes in this ship. However, the fact that other places are sinking like the Titanic is telling us why capital flows into U.S. markets is so strong.
When you are looking at large portions of the global economy being in trouble, that is a sign that everyone is looking for the safety valve. Western Europe is going to fall off a cliff. The banking system there is going to take down what is left of the economy across the continent.
China is dealing with coronavirus. Even before that, the country was facing an issue with the declining growth coupled with excess debt. The debt to GDP in China is the highest in the history of the world.
Japan is still dealing with the same deflationary spiral that it saw for the past 20 years. While this is most likely better for the average person living in Japan, it is not good under the current economic system that uses growth and inflation as the metrics for a sound economy.
Markets are very simple mechanisms. When there are more buyers than sellers, they go up, At those times where the sellers outnumber the buyers, the reverse happens.
Sometimes the non-sexy answer is the most practical.
Posted via Steemleo