1 Million.

1 Million.

Ok, so folks are bullish.

We got a Jeremy Siegel sighting on Thursday – 10% more this year on the Dow because of Trump, he figures:

And then there was Warren Buffett, whose “Dow 1 million within 100 years” call was grabbing headlines. Here’s WSJ with the recap on that:

You heard it from Warren Buffett first: the Dow Jones Industrial Average is headed above one million.

The blue-chip stock benchmark is likely to be above that milestone in a hundred years’ time, the Berkshire Hathaway Inc. chief executive and chairman said Tuesday night. It sounds eye-popping, but judging by past history, it’s actually a fairly conservative bet.

“The Dow will be over a million and that is not a ridiculous forecast at all if you do the math,” he said.

It would take a 3.9% annual gain for the Dow to hit that benchmark in September of 2117.

Next, Buffett will pull a Ricky Bobby and explain that “with advances in modern science and my high level income, it’s not crazy to think I can live” to see Dow 1 million.

The irony, of course, is that this comes just a day after the Fed announced its intention to reduce the alcohol proof of the punchbowl to its lowest level yet, starting with balance sheet runoff and continuing with a rate hike in December. It’s also ironic that everyone is doubling down on the bullishness on a day when the Dow fell for the first time since September 7:


The VIX “spike” (if that’s what you want to call it) that accompanied the Fed is now a distant memory, although the gauge was up slightly on the day.


Ultimately, everyone who piled into UVXY presumably expecting some fireworks around Yellen probably aren’t thrilled (hence maybe the outflows yesterday):


The curve continues to collapse, with the 5s30s dropping below 91.6bp for the first time since December 2007.


“The previous 2017 low was reached July 6, the day after minutes of FOMC’s June meeting appeared to affirm a gradual rate-hike path despite soft inflation data,” Bloomberg notes, adding that “for most of past two years, the curve ranged from 100bp to 150bp.”

You’ll note that no one has told financials about this development:


Here’s Deutsche Bank’s Kocic with some color on this:

In the absence of additional information, we believe that, in the next six months, the mode of curve repricing will be sequential. In the first period, the market is likely to chase the Fed “one hike at a time” without being overly precise about the terminal rate, in the absence of additional information. This is a short term 2s/5s bear flattener. As more data comes in, and with a possibility of additional solid print in inflation and/or more advances on the fiscal stimulus front, there could be more focus on the long end where risk premium has been excessively compressed. This could be a bear steepening of 5s/10s in the mid-term. A vol optimized implementation of this path is in terms of curve cap calendars.


The dollar meandered around as traders appeared to be rethinking what to do next following the Fed. USDJPY held onto its post-Fed gains as the BoJ’s steady-as-she-goes stance communicated overnight supports the policy divergence pillar. Here’s a bit of context on how far we’ve come since the Friday before Irma and North Korea’s founding day:


The Aussie fell after Lowe reiterated that he’s not going to be bound by what policymakers in other countries do, although as Richard Breslow observed earlier today, “I’m not sure who they thought had written the speech but warning that, while rates may not rise for some time, (undefined) investors ‘should prepare for higher rates’ is pretty plain and not dovish”:


Of course it wasn’t just Lowe weighing on the aussie. There was also the Fed and of course iron ore, which has careened into a bear market:


Oh, and the krone outperformed on the day after the Norges Bank adjusted its rate path slightly higher, which is more important than it sounds in terms of what it says about how global policymakers are shifting away from easing:


Finally, China was downgraded by S&P, but in all likelihood, that’s bullish because you can bet that any turbulence will be met with plunge protection in equities and to the extent any concurrent yuan weakness overshoots what’s “desirable” in the context of the recent run-up, that will be “corrected” as well. If you don’t believe that, then just look at what’s happened since the Moody’s downgrade:


In the final analysis, all you need to know on Thursday is that if you can make it to 2117, the Dow will be at 1 million.

One thought on “1 Million.

  1. Correct this if wrong, but wasn’t government intervention in stock markets unthinkable a few decades ago? And how do Japan and China have any credibility? It’s early now to say but I never believed in Santa Clause until negative rates became engineered. Finally, isn’t that million Dow presuming the dollar stays pretty strong? It also presumes profits will exist in an automated economy. Buffet opens a Pandora’s box of social debate making such inane comments. They call it involutional psychosis, I think.

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