"But when it does, the Fed's reaction is going to be very interesting."

I think may be the Fed's will jack up the QE to 400 billion per month as they might need 5 trillion to double the market in a year.

But then I also think it the dollar index which will limit what the Fed will do.

Going to be very interesting indeed

Yes, the feds reaction will indeed be interesting! Like you, not a clue when it pops, but pop it will. It's either destroy American hegemony by crushing the USD or secure hegemony and let the stock market function as a "market" rather than as a device to further enrich the top 1%

Interesting times ahead

None of these guys know anything. The market is in melt up mode. It will never break.

I wonder how much of the stock market reflects either or both of these things:

1. Stocks are desirable, inflation-proof money.

2. Why pay dividends to "owners" who have no need for them? Let the "owners" defer taxes by converting dividends to the stock price. Cost? High P/E. Pffft.

Momo crowd (momentum) doing their part along with trend. So long as the train moves forward the momo gets a bid.

Add buyers (index trackers) that are not price sensitive.

Stir.

Increasing risk, momos tightening stops, some butterfly flapping its wings and the exit gets crowded and the momo shorts get placed.

Here's an interesting article on Bitcoin. Doesn't sound like anything to be in.

The Bit Short: Inside Crypto’s Doomsday Machine
Crypto Anonymous
Jan 14·2021

This is the story of a Bitcoin trade — the most financially impactful trade I’ve ever made in my life. It’s also the story of the deep-yet-frantic investigation of the crypto ecosystem that led me to make that trade. And it’s the story of what’s really going on in crypto — and what we should do about it.

If you own meaningful amounts of cryptocurrency or you’re considering buying some, you’re the reason I wrote this. Please do read to the end.

At ZIRP, it is a different world. Money is free for traders. Also the whole price and valuation argument goes out the window when Fed computers keep the bond market levitated. Money will come out of stock and into bonds if the Fed ever let's up.

I see a market that goes nowhere interestingly in 2021 but will make a bull run in 2022 as we come out the mistakes of Trump administration on covid and trade. It will take a year to undo the mess Trump created.

we're all frogs sitting in a pot being slow boiled. Because the temperature is getting raised ever so slowly we don't recognize the danger. The risk reward trade-off in the market could not be worse. And when you consider low bond yields , fixed income isn't really an alternative to equities.

Having been through many bubbles, this is clearly a bubble. The bigger the bubble, the bigger the pop. Not sure when it will pop, but it will pop and many investors will be decimated.

I have been befuddled by the stock market as well however I have come to terms that just like the dollar wont lose its reserve currency status because there is no other currency alternative to go to so too is the US stock market.

Where else would you invest money in China? Mexico? Brazil? Germany? Iceland?

There are no good choices for a variety of reasons: communism, socialism, taxation, etc. The US is the only safe harbor in the investment universe.

Yes, there will eventually be a correction but quite honestly, there is no real alternative and the market will pop up after the next correction.

Mish, for all the time you spent in Illinois time to volunteer your services to mediate between the Chicago Public Schools and Chicago Teachers Union. The fate of the city depends upon it.

I expect these bubbles will get considerably bigger before they pop. Especially with the helicopter money to paper over the economic effects of COVID.

But I decided equities were too manipulated and subject to central bank policy a decade ago....

The problem with stocks now is that everybody knows about the Fed put and trusts it.

It’s not that I don’t believe in it.....it's just that playing that game depends on market timing now....in way that it never did in the old days. Everybody thinks they’re in a liquid market...but they don’t consider what can happen on some bright day when absolutely everybody wants to be a seller, and.....almost nobody understands the actual mechanism of that works.

When corrections do come, there is no tangible value in stocks to reduce the risk....in housing there is.....

With corporate balance sheets loaded-to-the-gills with debt and capital structures containing only tiny slivers of equity at this point, this "market" is a one-way bet on eventual hyper-inflation. Even a whiff of deflation could be absolutely deadly.

I continue to hear the Fed has used up all its tools. They must have bought short-term extended warranty on the tools because they have been incredibly lucky.

I wish I had an extra dollar for every time I’ve read a ZH article insisting that the Fed is “out of ammunition”. It would solve my present conundrum of how to raise more cash.

Lyn Alden, brainiac, has an article for non-brainiacs about how interest rates affect equity prices:

I kind of wonder if she and Hussman would disagree about something on this issue, but I'm not smart enough to figure that out.

@Mish What do you think of the idea that the Fed could avoid deflation and inflate away some national debt by buying gold at $10K+ (with printed USD, of course)?

Check out this chart - like 1999 all over again...

How Options Trading Could Be Fueling a Stock Market Bubble
A swell of individual investors are betting that stocks will go up. That enthusiasm is having a growing influence over the regular stock market itself.
By Matt Phillips
Jan. 25, 2021

As so many of you have already noted, “pop it will...” I have felt that way since 2015, along with John Hussman, who I deeply respect. I welcome getting back to a market I can at least connect to investing fundamentals, if not celebrate. It’s been hard to sit out the runup since then, but I do sleep at night.

The sad part of the market “popping” is, the usual suspects are likely to get bailed out, while the rest take a direct hit in the pension. Ironically, failure to address the obvous distortions in valuations now ensures greater suffering down the road. And will further undermine personal savings prospects for decades to come.

My wife asked me this morning, “honey, why aren’t we in stocks?” Her friends are crowing about “all the money they are making in the market”. Really? The little guys are about to be crushed — again... The traders and promoters? — IBGYBG. Which is completely predictable, and truly sad.

That's an amazing article. Thanks for sharing.