The global economy is characterized by enormous imbalances, particularly the $2 trillion or so in reserves parked at the People’s Bank of China.  This build-up of reserves is one culprit of the asset-driven economy.

First, let me congratulate the algobots, hedge funds and prop desks – who are all trading with each other and pushing the market higher and higher – for cracking the 4 billion volume share mark.  It was touch and go, but we were able to get over the hump on the last few ticks of the day, otherwise it would have been three days in a row of NYSE Composite volume printing sub 4 billion shares.  In fact, the past three

As the machines did their usual thing and threw money into stocks, they did so on the lightest volume day of the year.  A grand total of 3.78 billion shares on the NYSE Composite hit the tape today, which does not say a lot following the much anticipated jobs report on Friday.  Allegedly, this light volume was because market participants were awaiting the super-secret meeting of the FOMC, who are deciding whether or not to hike the discount rate another 25 bps.

I look at a variety of stock market valuation methodologies.  Below are several, but I look at many others as well to get a sense of valuation.  Of course, valuation means absolutely nothing in the near-term.  It is, however, the single biggest determinant of long-term returns in the stock market. 

Assuming, of course, we do not go the way of Argentina.

One of the many negative ramifications of the Fed’s grossly incompetent monetary policy over the past few decades has been to reward speculators and punish savers.  Charles Schwab makes this point, only in a much nicer way, in today’s Wall Street Journal.

There are two reasons why the market is screaming higher – enormous liquidity and an improving economy.

An ocean of liquidity has flooded the markets, thanks primarily to the Federal Reserve and government programs.  One can either surf the ocean (by going long) or drown in it (by going short).  The tricky part is getting safely to shore on the surfboard when the tide goes out. 

If the month were to end today, the Russell 2000 would be up 9.8% in March.This would be the 11th strongest month since 1980, in the 97th percentile of monthly performance.

The question is, what now?