Don't Thank the Fed for Record Highs, Thank the CEOs

By Stocks FOXBusiness

The stock market isn't rising because the Federal Reserve is printing money. I keep hearing this all around and it is intellectually dishonest and it spits in the face of every hard working CEO and CFO of public companies who are being forced to be more efficient than ever with less clarity of the future. 

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They are also being forced to be more creative in dealing with an over-burdensome regulatory environment. The executives of these public companies are posting great earnings while having to also navigate through the  hurdles that ObamaCare has put in front of them, along with soft global economic conditions where they derive most of their growth from.

The stock market is rising because earnings are strong and with interest rates low, the market's acceptable valuations are much higher than when interest rates are high.

Even with the nominal numbers on the major averages hitting highs, the stock market based -- on earnings forecasts -- is still 20% below where it should be. To be clear, stocks as of right now are 10% undervalued, and should be 10-15% overvalued. They aren't.

The Fed only has direct control over the fed funds rate and the discount rate.  Money printing attempts to affect the long end of the yield curve and this has little impact on stock market earnings nor valuations.

Make no mistake about it, the printing of money is disastrous for our economy today and for tomorrow, but the printing of money isn't the reason stocks have moved up. It just isn't that simple and to attribute the rise to printing of money through quantitative easing is just flat out wrong. In fact, history supports that when we first start to see a rise in yields on the short end of the curve, it signals that the  world and U.S. economy are recovering and historically it points to a trend of sustained stock price appreciation.

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Barring any major geopolitical event, stocks should rise for awhile. Oh, and give a hug to  your closest public company CEO and CFO.