Taps Coogan – December 14th, 2020
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According to Mr. Rosenberg:
“When you’re an equity investor and you see that the central bank is going to be taking the discount rate, what you would discount future cash flows with, which are interest rates in the corporate market…, and converge the discount rate with the risk free rate and then tell markets that the risk free rates is going to stay at zero for at least the next three years… In this environment…, there’s no limit to how far the multiple goes. And that’s the story of the stock market… You think it might be the vaccine… (but) it’s the cherry on the cake. The cake was already there and built by the Federal Reserve.”
“So, we are in a huge financial bubble. But as my hero Bob Farrell always used to say ‘Bubbles last longer than you think, but they don’t correct by going sideways.’ We know they end in tears and so will this one, and when it does it will be because, as a government, we over stimulated, inflation came back and interest rates aren’t at zero anymore and that could be some time away. But if you are looking for a catalyst for when all this ends for the stock market or financial assets in general, it’s going to be when inflation moves from death, to dormancy, to having a pulse that causes interest rates to back up and cause this party to end…”
I couldn’t agree more.
There is more to the interview, so enjoy it above.
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