Stocks have hit and stayed over 2000, which is a remarkable feat as well as historic. Of course, the current price levels have me a bit skeptical as well as a little fearful for investors jumping into this overvalued market. Earning have been increasing, but this doesn't mean that we should be willing to pay higher multiples on those earnings. It also doesn't mean that we should only use earnings as the basis of our investment decisions, I'd personally rather use free cash flow. Quantitative Easing, or QE, will end soon and Fed Chairwoman Yellen has already indicated that she doesn't intend to raise interest rates.
The Fed's involvement in both keeping interest rates low by buying short term bonds and inflating prices has really been the support system for the economy. Of course, this cannot continue forever. Corporate growth is a little comforting, and will hopefully be sustainable without the Fed's extra involvement in the economy. However, it doesn't justify paying higher and higher prices. Continue Reading »