You know me.
I'm not prone to hype, nor do I say things I don't mean. My job as Chief Investment Strategist is to help you make a fortune by telling you what you need to know. Sometimes that's stuff the Street hasn't thought about yet, or simply doesn't want to consider (but should in the name of profits).
So today, I'm just going to say what I gotta say:
The Dow Jones Industrial Average will hit 60,000 within the next 10 years.
The Dow Could Triple Within the Next 10 Years
Before I go any further, though, understand this.
What I want to share with you today may be the single most important market driver in the history of modern finance.
It trumps earnings, fundamentals, the Fed, the world's central banks, terrorism, geopolitical hijinks, and more. It renders the question about whether or not stocks are expensive moot. And it makes conventional thinking with regard to traditional diversification a dangerous relic of the past.
Make no mistake about it.
If you and your family have ever wanted to be fabulously wealthy, this is your chance.
The markets could double or triple within the next 10 years.
That means the Dow Jones Industrial Average hits 60,000.
That the S&P 500 tops 7,200.
That the Nasdaq exceeds 18,900.
I know this is a lot to take in.
But hang with me.
Your financial future depends on…
It's a nebulous term you've heard hundreds perhaps even thousands of times since the financial crisis began. So much so, in fact, that most investors take it for granted – meaning they think they know what it means so they dismiss its importance.
In reality, very few people actually have a clue. Even hardened professionals have trouble processing the concept I'm going to share with you today.
Technically speaking, liquidity is a function of monetary policy, electronification, and engagement. It's made of up of four discrete but related dimensions: immediacy, tightness, market breadth, and activity – all of which determine the amount of money that can or will be put to work in the financial markets as a function of risk.
The plain English explanation is far simpler – the more money that's sloshing around, the higher stocks will go.
It really is that simple.
I understand if you're skeptical.
Many investors are. They fear a recession, political hijinks, terrorism, war, and "expensive" stock prices. Throw in the prospect of a massive market correction and the end of the financial universe as we know it, and most want to hide in the basement.
Logically they're hesitant to invest.
The problem is that's based on a mistaken belief that the markets are a closed system.
That might sound strange to you, but today's central banks do not operate like your checkbook.
The liquidity I am talking about is created out of thin air.
There is no limit to how much money they have or do not have. Nor are there boundaries with regard to spending.
But, but, but…
Trust me when I tell you that the markets do not work the way you've been led to believe. There is no checking account that central bankers access, nor is there some sort of slush fund. Just fancy accounting.
Here's how they do it – create money out of thin air, that is – and why every dollar they create winds up in the stock markets sooner or later.
Take the Fed, for Example
Like other central banks around the world with their own debt, Team Yellen has to buy and sell billions of dollars in U.S. Treasuries each day from the big banks and trading houses, yet doesn't have to pay a dime when it does.
Instead, what happens is the Fed issues a credit to the seller on their Federal Reserve Statement which, for all intents and purposes, is like your bank account statement. At that point, the seller can either use that money or keep it "on deposit."
Most "use" it to buy other bonds and financial instruments on the open markets because doing so is at the very core of what makes them profitable. At this point those very same credits issued by the Fed get transmogrified and – voila – become "cash money."
Interestingly, I get asked a lot about why the big banks and trading houses don't just stop trading or at least slow down when the going gets tough, like any rational investor would.
What most folks are missing and why there's such a disconnect is that big banks cannot sit on their hands and do nothing even when market conditions suck, when stocks are too expensive, or trouble looms. They have to keep the money they use moving at all times because their existence depends on it.
So, the sellers start making loans, issuing insurance, trading in derivatives and – ta da – buying stocks – all the while using money that was literally created from nothing.
Here's where the rubber meets the proverbial road and why I am so certain that the gains we have seen so far are but a fraction of what's ahead.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.