Dow Jones Utility index could trade like the FANGs

The world is changing because the US FED is considering capping the US 10 yr interest rate under the US inflation rate, or negative real interest rates forever. Further massive destruction of the US dollar purchasing power.


Previous Post: Formula for when the great stock market rally ends

In the previous post this blog said:

When valuations for the boring water company or the boring electric company is trading like your Facebook, Apple, Amazon or Netflix or Google (ie FANG) you know something is wrong.

This is when a seriously over valued market is screaming at you.

Of course the reader must understand in a world where money printing goes super nuts (Zimbabwe style) the stock market may go hyper inflationary and picking a time frame for a top is never a good idea, but we are not there yet. There is no Ben Bernanke helicopter money to the masses yet (ie MMT).

We may be there, 'helicopter money lite'. If the intention is to cap interest rates under inflation, this is a form of massive easy money (or easy debt). 

Of course the effect of negative real interest rates is the US 10 yr is now broken because it does not protect you from inflation, this is interest rates suppression, of fake. The US FED has enacted this policy before, during WW2, are we in WW3? No. Yet the debt levels as a percentage of GDP suggest we are. Crazy.

This means investors will hunt for a UST 10 yr alternative, hence utility stocks with their high dividends will attract a lot more investor interest. Yes a water company may go to a P/E of 40. 

This means demand for quality utility stocks around the world will be strong, and if the US dollar falls, utility stock in other parts of the world will be attractive. 

A good place to hunt for Wyckoff, cycles and Gann angles.



Long term channels

Close up of the above chart.

Of course nothing moves in a straight line, corrections of 10% to 20% along the way are likely.





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