The US has become an MMT country, on its way to being the Zimbabwe of the developed world. Of course that will boost the stock market, just look at Zimbabwe's stock market, it is the best performing in the world over the past 10 years.
The Zimbabwe Industrial Index, has gone from 45 to 5870 over the past 10 years. There are no sustained downtrends when you have the government trying to print their way to prosperity.
Until you see major resistance from the masses towards more money printing, you will not see it stop. Even in those cases, the money printing usually keeps going on because it is so hard to stop it. Throughout history, you have governments abusing the printing press to spend money that isn't coming from taxes, eventually leading to inflation. Dilution of silver and gold coins with other metals, or just making the coins smaller and thinner.
You are seeing a huge move weaker in the dollar and concurrent move higher in gold. The markets see what the US government and Fed are doing and have decided to run. Eventually, inflation will go much higher as the enormous amounts of currency starts getting pumped into the economy after the pandemic is over. When you start paying people more money to not work, you will get a bunch of lazy people who will not want to work, but would rather spend that time daytrading or watching videos or online shopping.
I expect a huge fiscal stimulus package to eventually pass after the Democrats pile on the pork to the Republican deal, making it bigger, spending more money, and putting lipstick on a pig. The way the two sides compromise is not by cutting off parts of the initial proposal, but its to add lots of pork to take their ounce of flesh from the deal to please their constituents and lobbyists. What always happens is you end up with a huge bloated spending bill which gets passed is much bigger than what it was initially designed for.
And the markets love it, all that pork spending, eventually it trickles down to corporations and is a long term positive for the stock market. Being a bear is fighting the money printing and government spending fundamentals that will not change in the near future. This is something short sellers need to keep in mind at all times when they see the price action.
So why short? What I am discussing are longer term forces which are strong, but the stock market moves are based on shorter term forces as well, and those are overwhelmingly bearish, as I have mentioned in previous posts. Which is why I am short. Although I have reduced my short index positions today to be able to add more later this week.
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9 comments:
The hyperinflation could be with companies who have some kind of pricing power...on the other side, increasing numbers of zombiefied US companies are going to be saved by the equity and debt markets (like US shale did it), therefore creating huge deflationary pressures like it happened with oil...the more funds they get, the bigger deflation in the final product.
Wait, once some those zombies learn a way how to fund a company in "DRYS or TOPS way" (3-4 ATM equity offerings a year)...some of the techs already learned it and they are funding their employes by stock compensations (like SNAP, more stock compensations then revenues in their whole history), so it doesnt looks so obvious...
Zombified US companies aren’t going to be a deflationary force because competition has basically been eliminated in the US with all the monopolies and oligopolies. Read the Myth of Capitalism to see what kind of capitalism is going on in the US. There is lots of pricing power out there. Overcapacity is the last thing the US needs to worry about when its paying its citizens more to daytrade stocks while collecting umemployment than from actually doing work.
Agree that many companies will go the DRYS and TOPS mass equity dilution route if the Robinhood retail knuckleheads keep providing the liquidity for POS stocks.
Your strategy looks exact, which is waiting for big and rampant down.
Do you have any idea about limit on NQ about this rally prior to big down?
For example if NQ is gonna touch 11000 before major corporation like AAPL earning announcement, willing to add short?. or Do events like earning announcement or phase 4 stimulus news makes timing to get into market?
Thx for your opinion.
50% chance of going to 11000 and 50% chance of going to 11300.
Just my humble opinion
Don’t know the exact level before we go down big, this is an art, not an exact science. But experience tells me that most long investors like to buy after a big event, and AAPL, AMZN, and GOOG earnings are a big event. Even if NQ is at 11000 before the event, I will still wait till after earnings to add shorts.
Is this the book?
https://www.bookdepository.com/Myth-Capitalism-Jonathan-Tepper/9781119548195?ref=grid-view&qid=1595927663458&sr=1-1
Yes, that's the book.
while I agree with your "the myth of capitalism" point...there is going to be more and more companies who cant compete with products, but can only compete with equity rises...I think what happened with oil or marihuana (2-4x equity rises a year), is already happending via stock compensations in Tech. Of course the market isnt going to get it soon..but when it gets, the tech is going to get destroyed too (No revenue growth per share, dare I say net earnings per share). The big will get a bigger, the loosers are going to disappear...
At a certain point, the tech executives at the overvalued firms will realize its better to raise money with their bloated stock and use that moeny to pay themselves well than to try to pump up eps by buying back grossly overvalued shares. So yeah, Nasdaq stocks look very vulnerable under that scenario where stock buybacks become less popular and equity raises become very popular.
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