Event Risk Is Driving Markets

Peter Boockvar from a recent speech:

If the DJIA goes to 10,000, great! But if gold goes to $2000 at the same time, maybe not so great. If the stock market was left to its own devices, than I would say 400-500 in the S&P would be its inevitable destination as 10x ’09 earnings of about $40-50 would be a fair multiple based on previous bear market bottoms. Unfortunately, our officials won’t let it happen as any recovery that may soon ensue will be darkened by the insidious hidden tax of inflation, debasement of our currency and excessive sovereign debt that will take more and more tax dollars (aka, money sucked out of the private sector and shifted to government) to finance.
We all have to understand that the Fed and Treasury have embarked on a grand experiment. We now have a marketplace where fundamental analysis is being trumped by huge event risk of a different kind, Washington, DC kind, where some new acronym program, some reckless comment from a Congressman or some new asset class Bernanke Capital Management deems attractive to him, is driving markets.

(Note: I originally misidentified the speaker as Barry Ritholtz. This has since been corrected).

Posted by on April 17th, 2009 at 4:43 pm


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