Conventional wisdom says this stock market is tame in comparison to the dotcom boom of the late 1990s…..That’s a hard one to swallow. Because when you start drilling down and really looking at this market, some startling similarities with 1999’s tech craze begin to bubble up. And of course, that boom was followed by a bust starting in March 2000 that eventually erased half of the stock market’s total value. It wasn’t until this year—17 years after the fact—that the tech stocks in the S&P 500 index fully returned to their dotcom-era highs.
Tesla just reported its worst quarter ever, which means something. It lost $671 million and burned $1.4 billion in cash in the third quarter, on $2.98 billion in revenues. In the three quarters this year, it lost $1.47 billion and burned $3.2 billion in cash. The Model 3 isn’t happening in any appreciable numbers. Only a few hundred hand-fabricated units have been rolled out, with mass-production being woefully behind the company’s silly promises.
In a market very, very, very, very far away, there lived a ruthless race of beings known as … Momentum Investors…….The evil leaders of momentum investing, having foolishly overestimated economic and profit growth and taken valuations to an extreme, have revised a secret plan to take every breath of reason from their reason- loving neighbor, Value Investing. Today is Halloween. Unbeknownst to the consensus, but knownest to us, danger lurks in the stars above…if you can read this, you don’t need glasses.
One month ago, Deutsche Bank’s unorthodox credit analyst, Jim Reid published a phenomenal report, one which just a few years ago would have been anathema in the hushed corridors of high finance as it dealt with two formerly taboo topics: is a financial crisis coming (yes), and what are the catalysts that have led the world to its current pre-catastrophic state, to which Reid had three answers: central banks, financial bubbles and record amounts of debt.
Similar to the MCD analysis, we evaluated changes in fundamentals, equity price and valuation data over the last five years for most companies that comprise the S&P 500. The data below, summarizing our broad findings, is based on 475 of the 505, S&P 500 companies. 30 companies were omitted from the analysis due to insufficient data……141 companies, or about 30% of the S&P 500, had annualized five-year sales growth rates of 1% or less…….The average stock price gain over the five-year period was +68% ….106 of the companies had a stock price increase of 25% or more that was concurrent with falling revenue.
Here’s the story in a nutshell: Ultra low interest rates mark a shift away from people’s wealth residing in their savings and pension plans, and into to so-called wealth residing in their homes, which are bought with ever growing levels of debt. When interest rates rise, they will lose that so-called wealth. It is grand theft auto on an unparalleled scale, and it’s a piece of genius, because while people are getting robbed in plain daylight, they actually think they’re winning. But as I wrote back in March of this year, home sales, and bubbles, are the only thing that keeps our economies humming.
In theory, Americans should be proud of their national capital and all the important work that gets done there. In theory. In reality, our nation’s capital is an utter cesspool of self-serving, unethical and unaccountable parasites. We all know it and, even worse, it’s probably a hundred times more grotesque than we can imagine. A distressingly high number of people attracted to this swamp don’t go there to do good public work or help the American people. They go in order to enrich themselves at our expense.
Investment markets have been remarkably resilient over the course of 2017. Sure, the geopolitical environment has thrown up a few frightening days which saw markets sell-off but on the whole volatility has been muted and most asset classes have generated solid total returns. That said, any horror movie fan will tell you that the scariest part of a horror film happens when things are relatively calm. With that in mind, here are a few charts that shine a light on a number of threats that are lurking just below the surface of the global economy.
Once the CIA went to work in Vietnam to undermine the 1954 Geneva Accords and the planned reunification of North and South through a free and fair election in 1956, the die was cast. The CIA’s support for the repressive Diem regime and its successors ensured an ever-escalating war, as the South rose in rebellion, supported by the North. No US president could extricate the US from Vietnam without exposing the limits of what US military force could achieve, betraying widely held national myths and the powerful interests that sustained and profited from them.
……I think the agencies fear something larger: exposure of their gross incompetence, their “cowboy” recklessness and their disavowal of elected-civilian control. Their fear of this exposure is based on one simple fact: nothing’s changed since 1963. They were unaccountable and incompetent then, and they remain unaccountable and incompetent now. The only difference is their funding has greatly increased.