by Clif Droke
Financial Sense
A fiery debate rages among investors over the question of central bank stimulus. The question is whether the stock market needs stimulus in order to advance, and is stimulus only creating a bubble which will burst at some point and lead to depression?
Regardless of the philosophical rectitude of central bank intervention, there can be no denying its efficacy. The most fundamental truth of the financial market is that “liquidity, liquidity, liquidity” is the market’s lifeblood. Financial stimulus contains the seeds of recovery and will cure any bear market in equities, as I’ll attempt to prove in this commentary. The truth of this assertion can be found in the very wisdom of King Solomon, who in the book of Ecclesiastes wrote that “money answers all things.” Stocks will always, without exception, respond positively to stimulus – provide there are no countervailing obstacles in the way [e.g. tax increases, margin requirements].