Dow, NASDAQ, S&P 500, NYSE, Bitcoin All Rally To New All-Time Highs

Tom Brady showed the world a champion's mantle on Sunday, as he led the Tampa Bay Buccaneers to a 31-9 victory over the highly-overrated Kansas City Chiefs in Super Bowl LV (55).

In celebration of Brady's magnificence, stocks rallied Monday to new all-time highs.

While it might be suspected that stocks responding to the NFL's season-ending championship is just a wee bit of hyperbole, but any explanation for the rise in the price of stock indices must be taken with sufficient grains of salt.

Stocks are rising because the US dollar is nearly worthless. The Federal Reserve has conjured up so much fresh capital over the past year that it must seek a home in assets. The dollar's preferred place of residence these days is in stocks, and to a large extent, real estate, especially of the residential kind.

According to the Fed's own data, M1 money supply* increased by 66.5% in the 12 Months from December 2019 to December. 2020, and most of it was borrowed, or, in Fed-speak: borrowings from the discount window's primary, secondary, and seasonal credit programs and other borrowings from emergency lending facilities.

Non-seasonally-adjusted money in circulation (M1) rose from $4.04 trillion in December 2019 to $6.76 trillion in December 2020.

Why the big increase? Simple, because it was declining, and the Fed can't have a decline in he amount of currency out there lest it risk a stock market crash, defaltion, and additional purchasing power for the world's reserve currency. Rather, the Fed is hell-bent and committed to ever-rising levels of its currency in the world, all of it debt-based. Every dollar borrowed by the government, business, and individuals is owed to the Fed, and they want more. Certainly they are not done.

The catalyst for the most recent surge in money (currency) supply was, of course, the coronavirus crisis, which shuttered businesses, disrupted supply chains, shunted consumer spending and generally caused the economy to generally slow down. From December 2019 to February 2020, M1 shrank by more than $100 billion, making the timing of COVID-19 somewhat miraculous. The panic allowed to Fed to open the currency spigot full bore, spilling out all manner of lending facilities, thus creating a boom in stocks.

Everybody knows what happened. After stocks crashed in March, the money flow was so grandiose that the Dow gained (through Monday) 70% off the lows, the S&P, 75%, and the NASDAQ rocketed higher by 104%, and the Fed is not nearly through, continuing to borrow - adding to the balance sheet - $120 billion a month, of which $80 billion is in treasuries and $40 in mortgage-backed securities. They've committed to those levels of borrowing for the rest of the year, and, another thing everybody knows, they can't ever stop, or the economy would slow down and eventually collapse.

So, stocks are up not because companies are doing well (some are, many more aren't), but because there's too much currency chasing a limited amount of assets. Speaking of limited supply, median new home sales hit another new record in January of $330,225, up 10% from the same time a year ago. Nothing says stupid like buying a new home built with $6 2x4s and $40/sheet OSB (plywood).

Other things are going up in price as well, like Bitcoin, which advanced from $39,155 at 7:30 Monday morning to $48,200 by 2:00 am Tuesday all because it was revealed that Elon Musk's company, Tesla (TSLA), bought 1.5 billion worth of the world's leading cryptocurrency.

But, that's another story for another day. Let's just say it's more about value than price right now.

* M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs, each seasonally adjusted separately.

At the Close, Monday, February 8, 2021:
Dow: 31,385.76, +237.52 (+0.76%)
NASDAQ: 13,987.64, +131.34 (+0.95%)
S&P 500: 3,915.59, +28.76 (+0.74%)
NYSE: 15,226.61, +157.01 (+1.04%)