The investment community is divided down the middle into a deflation camp and an inflation camp. From a high level, both parties agree on much of the same issues, such as the negative consequences of overusing debt capital to sustain economic growth. The two parties, deflation and inflation, don’t even necessarily disagree on the ultimate end game. The next several years, however, are still up for debate.
A very similar phenomenon is unfolding in nearly all developed economies. An overuse of debt capital for unproductive projects and initiatives has rendered all major economies impotent in terms of the ability to generate real economic growth without borrowing something in the range of $5 of debt for $1 of growth. Clearly unsustainable.
Our focus will be mostly on the US economy in this note, although a similar process and potential outcomes are available to most developed nations.
To summarize briefly, the US economy came into the COVID crisis with public and private debt to GDP near 370%. The ratio was near 260% if we exclude the foreign and financial sectors. In order to ease the pain of the COVID crisis, as an economy, we borrowed an extreme amount of money to keep failing businesses and households afloat. These actions, while necessary, pushed nonfinancial debt to GDP above 270% and well beyond all critical thresholds studied and deemed to cause negative impacts on the economy…CLICK for complete article
Just days after a new partnership with General Motors Company sent Nikola Corporation shares soaring, Nikola short seller Hindenberg Research released a new report accusing the company of being “an intricate fraud built on dozens of lies.”
Hindenburg allegedly spoke to a former Nikola employee who said the company’s YouTube video entitled “Nikola One in Motion” was produced to appear to show a Nikola truck driving down a desert road, but the truck in the video was actually towed to the top of a hill and released. The video allegedly showed the truck cruising once it had accelerated from rolling down the hill.
“Although the company didn’t specifically say the truck was moving under its own power, it was the clear implication,” Hindenburg wrote in the report….CLICK for complete article
Andrew Ruhland over at Integrated Wealth Management thought this article would be our interest to our readers. ~Ed. “With all of the insanity that is the U.S. Presidential Election year (Covid-19 is merely an “accelerant” and stretched valuations of bigcap tech are a sideshow), this is the single biggest risk to The Republic, markets, and the civility of the North American continent. Mistrust of the election itself is toxic, and therefore dangerous…potentially fatally dangerous.”
We are not going to know the winner of the presidential election on the night of November 3rd. Sadly, we almost certainly won’t know the winner the next day either.
In fact, it may be many weeks before a winner is formally declared.
Laws have been passed all over the country to make voting by mail much easier, and it is being very heavily promoted in many states. It is being projected that at least 83 percent of all U.S. voters will be eligible to vote by mail in November, and that is an astounding number. If all of those people actually did vote by mail, more than 190 million votes would go through our postal system. But of course many people will continue to show up in person and vote the old-fashioned way. We will get the results from those that vote in person on election day very rapidly like we normally do, but it may take a very long time before all of the mail-in votes are tallied. Click for complete article.
Why this isn’t 1920 has everything to starting valuations and future returns. While, generally, I’m not too fond of comparisons between today’s markets and the past, Ed Yardeni made a comparison too bombastic to disregard in his blog:
“We live in interesting, though not unprecedented, times. The Roaring 1920s could be a precedent for the Roaring 2020s.
The good news is that the bad news during the previous precedent was followed by the Roaring 20s. So far, the 2020s has started with the pandemic, but there are plenty of years left for the prosperous 1920s to become a precedent for the current decade.
The 1920s ended with a stock-market melt-up followed by a meltdown. The 2020s may already be seeing a melt-up, begun on March 23.”
Ed’s point was the economic and industrial revolution that occurred following WWI is a precedent for the next decade. The urbanization of populations moving from farms to cities, the rise of manufacturing and technological innovations from Henry Ford and the Model T, to the “bulldozer,” to refrigeration and not to mention the radio.
1920 Was The Bottom
Yes, the ’20s marked the start of a period of marvel and rapid change.
1920 also marked the end of a 20-years of economic destruction. A series of events rocked the turn of the 20th century, which deeply suppressed financial markets. ((Imagine 20-years with negative total real returns.) CLICK for complete article
With the race to develop a COVID-19 vaccine in full force, and with Moderna having just published encouraging human trial results, news that Russian spies have been targeting vaccine developers in three countries is enough to make pharma investors extremely nervous.
Reports on Thursday emerged that Russian spies are targeting vaccine developers in the United States, Canada and the UK.
Security agencies from all three countries issued a joint statement saying that while espionage had not disrupted work on a vaccine, Russian hackers have been trying to steal information about vaccine efforts.
More specifically, the agencies are blaming the attacks on a Russian intelligence hacking group called “APT29” (aka “Cozy Bear” or “the Dukes”), which was also linked to the 2016 attacks on the Democratic National Committee.
“Throughout 2020, APT29 has targeted various organisations involved in COVID-19 vaccine development in Canada, the United States and the United Kingdom, highly likely with the intention of stealing information and intellectual property relating to the development and testing of COVID-19 vaccines,” agencies said in a warning.
The agencies said the attacks were also directed at the energy industry.
According to the UK’s NCSC security agency, the group “almost certainly operate as part of Russian intelligence services”–an assessment that is supported by the U.S. Department for Homeland Security (DHS), and other Canadian and U.S. agencies.
“APT29’s campaign of malicious activity is ongoing, predominantly against government, diplomatic, think-tank, healthcare and energy targets to steal valuable intellectual property,” the NCSC said…CLICK for complete article
Andrew Ruhland and the team at Integrated Wealth Management have updated their very popular, free online Financial Readiness Assessment tool for 2020. This easy-to-use survey tool provides instant feedback with a Financial Readiness score and specific advice on how to improve. In addition, you will receive a customized report with all your responses included for future reference. Whether you a employ professional investment advisor or prefer a DIY approach, this assessment tool is definitely worth 5 or 10 minutes of your time. ~ Ed.
CLICK HERE to access