War appears out of nowhere. Fuel prices go up. Farmers shocked by fertilizer price increases. Companies announce tens of thousands of layoffs. Government debt soars. The Fed says it will likely stop cutting rates. Inflation heads up. Consumer confidence keeps heading lower. Foreclosures are heading higher.
And the market goes up. Then up. Then up some more. Then hits an all time high. Then hits another all time high.
So I have to ask, where is all this new money (and it has to be new money, because the other money is already in the market) coming from? Are people mortgaging the house for FOMO? Is there really that much sitting on the sidelines waiting to jump in at the top? Are all these swell new investment products, funds, and companies not swell enough to trap all those loose dollars floating around?
I mean seriously. WaTF? (Where’s all The Funds…) coming from?
Here’s a piece in the Financial Times I found interesting:
At the end of December the total value of US stocks was $70 trillion. US money market funds totaled over $8 trillion, which represents a lot of ready cash. The US bond market is another $50 trillion part of which can be moved into equities.
Also in a momentum market moving funds from low beta to high beta stocks juices things. Selling stock in low-beta stocks decreases total market cap less than than increase in high-beta stocks. Money in GIS (General Mills with a beta of 0.12) has less effect than moving the money to VRT (Vertiv with a beta of 2.15).
Back in the day they tried alchemy to make money via gold. Now alchemy actually works we just don’t call it that. We call it FIAT – Poof! We just made some money but that did not create wealth so the only way to square it is by devaluing the (FIAT) currency. Have you noticed prices going up?
Another way to inflate the market is via debt. When the margin calls went out the market crashed in 1929.
Google AI:
Absolutely, leverage from debt was a primary driver of the 1929 stock market crash. During the “Roaring Twenties,” low interest rates and unregulated markets allowed for widespread margin buying , where investors could purchase stocks by paying as little as 10% of the value in cash and borrowing the remaining 90% from brokers.
What alchemy didn’t do Potosà did. Spain mined so much silver that it created inflation all over Europe.
Google AI:
In the 16th and 17th centuries, Spain flooded Europe with massive amounts of silver mined from the Americas—particularly Potosà (modern Bolivia)—causing a long-term inflationary crisis known as the “Price Revolution”. This surge in money supply caused prices to rise roughly 6x across Europe, causing severe inflation, reducing the value of silver, and causing Spain to face multiple bankruptcies. [1, 2, 3, 4, 5]
Key Aspects of the Spanish Silver Influx:
The Potosà Impact: The massive discovery of silver in Potosà accounted for roughly 60% of the world’s silver production at its peak. [1, 2]
European Inflation: The influx acted similarly to modern money printing, causing severe price inflation across Europe. This was described by scholars as a dramatic increase in commodity prices between 1525 and 1640, as discussed in and analyzed on this Reddit page. [1, 2, 3, 4]
The “Resource Curse”: While silver enriched Spain, it led to inflation that made Spanish labor and goods expensive, causing local agriculture and industry to collapse. [1, 2]
Economic Consequences: Instead of investing, Spain used the silver to fund foreign wars and pay for imports, leading to a loss of competitiveness, frequent debt defaults, and a long-term decline in economic power. [1, 2]
The Price Revolution: The phenomenon, sometimes called the “Price Revolution” or documented in studies like this Wikipedia article, affected all of Europe. [1, 2]
This massive influx of silver from the New World is often cited in discussions on Reddit (e.g., this subreddit) as a key factor in Spain’s economic history. The phenomenon was driven by the massive influx of silver and is described in detail in this article on the Medium platform
The bottom line seems to be the wealth effect. Good stock prices keeps the economy humming as those owning those stocks continue to spend. Meanwhile those without those investments continue to get squeezed by rising costs. They are cutting back. The K shaped recovery for now.
Analysts continue to tell us investors are confident the Iran crisis will soon come to an end. You have to wonder how long they can continue to tolerate uncertainty. Good earnings from tech stocks certainly helps. But now what? A long summer ahead. Elections in the fall.
When you seriously think about how money is created now, you realize that say you sell your house and you accept a mortgage, essentially a bond, you yourself, nobody else created money.
This is where the new money is coming from - debt.
But it also helps explain the wider global conversation about capital markets, since another stunning detail about our modern world is that US stocks account for 65 per cent of total global stock market capitalisation — up from 40 per cent in 2010.
I was surprised by this. I had assumed with industrialization in Asia and the global south the US share of the total stock market was shrinking, not growing.
As for the rest of it, it sure feels bubbly but maybe not. Alphabet just had a blowout earnings report. Google Cloud reported 63% growth with $460 billion backlog. Cloud margins were way up. Revenue overall was up 22%. PE is 29 but PEG is <1, which indicates Alphabet is undervalued. This AI/Cloud thing seems to be real. At least for Google.
The rest of the S&P 500 has a PE of 27, but with half the rate of growth. That doesn’t seem good. About 2.2% of the S&P 500 is Tesla, which appears wildly overvalued to me.
There are lots of foreign companies on the US stock market.
Google AI:
Yes, the U.S. stock market is a major global hub for foreign listings, with over 1,500 foreign companies listed across major exchanges as of early 2026. These firms, ranging from European giants to emerging market leaders, utilize the U.S. market for its deep capital pools, high liquidity, and investor prestige. [1, 2]
Here is a breakdown of the foreign presence on the US stock market as of early 2026:
Key Statistics (2026)
Nasdaq: Hosts the highest number of international companies, with roughly 1,053 foreign listings.
NYSE: Hosts over 530 of the world’s largest international companies from 48 countries.
Total: Foreign investors have also increased their holdings, holding approximately 30% of all US equities by mid-2025, one of the highest proportions ever. [1, 2, 3]
Top Foreign Companies by Region
Many well-known international brands trade on U.S. exchanges, often as American Depositary Shares (ADSs) or direct listings. Examples frequently highlighted as top holdings or high-growth prospects for 2026 include:[1, 2, 3]
Technology & Hardware: Taiwan Semiconductor Manufacturing Co. (TSMC), ASML Holding (Netherlands), Tencent Holdings (China), Sony (Japan), Nokia (Finland).
Capital and Liquidity: The NYSE and NASDAQ are larger by market cap and trading volume than almost any other regional exchange, allowing companies to access more capital and investors. [1]
Prestige and Visibility: A U.S. listing is viewed as a sign of quality, often enhancing a company’s reputation globally. [1]
Enhanced Research Coverage: Listing in the U.S. connects companies with a broader network of institutional investors and sell-side analysts. [1]
I find this to be unlikely. The current POTUS has consistently broken long standing agreements with foreign countries (mostly trade related) as well as the former Iran nuclear deal. Why would Iran agree to anything substantial (like surrendering their enriched uranium) with the knowledge the POTUS is likely to break the agreement in the future?
My guess is that the fiscal deficits and monetary stimulus now flow directly into the hands of already wealthy investors who pile their money into equities mostly in international corporations that have the power to grow their assets while controlling the wages they pay. Stock inflation instead of the inflation that used to come from rising wages.
“Aren’t you worried that events in Iran could derail this?” I asked. They shrugged. “Look at the markets,” one financier retorted. “They are doing great!”
The “Great” need the bottom 80%, and they are hitting the wall.
The invisible 80% are hitting a very real wall. More real than Wall Street itself.
Courtesy of Google
The “K-Shaped” Consumer Economy:
Top Earners Powering Spending: The top 10% of U.S. earners are now responsible for nearly 50% of all consumer spending, while the bottom 80% have seen their share of consumption continue to fall.
With the US debt continuing to explode, with no plan to bring it back under 100% of GDP, investors could be hedging against dollar debasement by moving money out of the bond market, into commodities and stocks. Also, stubbornly high inflation is making the US treasuries pig look super fugly, there’s not enough lipstick.
US money market balances are slightly down recently, but not by enough to explain the up, up, up and away equities increase. Although, every little bit may contribute…
When you don’t have the $$$$, FOMO is a powerful motivator to go leverage yourself! (I’ve trademarked that as a new MF censor friendly imperative…)
For banks, a late 2025 rule change lowered capital cushion requirements by changing the Supplementary Leverage Ratio Standards which theoretically allows them to purchase more low-risk treasuries. In reality, large dealer banks could use the rule change to increase higher risk allocation of “excess capital”.
Another proposed rule is currently in for public comment. This rule would lower capital requirements for all banks, in an effort to boost lending. No doubt some of this new lending will be for people who want to go leverage themselves.
Geesh, I wish the markets were more straightforward.
