Asset protection

Technically Speaking: Why This Isn’t 1920. Valuations & Returns

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

The Decade Long Path Ahead To Recovery – Part 2 Depression

The first article in this series, Part 1 Debt, details the massive accumulation of debt and how it will handicap economic growth in the future.

Debt is but one crucial economic factor to consider when assessing economic growth. There are three other “D” problems worth considering- Depression, Demographics, and De-globalization.

To assess where the economy is going, you first must know where it is. With that in mind, the focus of this article is depression.

Visualizing a Depression

Will the current economic slump be called a recession or depression? No one knows for sure because there is no precise definition of depression. That said, recessions tend to be relatively brief periods of economic contraction – 18 months or less. Depressions, like that experienced in the 1930s, extend much longer.  What we do know now is that recent economic data is unlike anything seen since the Great Depression.

Fortunately, the economy appears to be stabilizing and showing signs of recovery. We caveat the statement as recovery rests solely on the crutches of unprecedented Federal and Monetary stimulus. Fed and government actions are not only buying economic growth but time.

The graphs below show that some of the economic damage seen thus far is mind-boggling…CLICK for complete article

The Gamaleya Institute candidate being produced in Russia (it’s far from the only vaccine project underway in the country) is among the 26 being tested on humans in the country. However, it’s still listed as ‘Phase 1’ for testing.

Kirill Dmitriev, the head of the Russian Direct Investment Fund, the project’s main financial backer, confirmed Tuesday that Phase 3 trials are ready to begin on Wednesday, while mass production likely won’t begin until September or October. More than 20 countries have already ordered doses, he added. Jasarevic added that the process being undertaken by the WHO to review the Russian vaccine would be the same undertaken for any other vaccine project.

“Every country has national regulatory agencies that approve the use of vaccines or medicines on its territory,” Jasarevic explained.

“WHO has in place a process of pre-qualification for vaccines but also for medicines. Manufacturers ask to have the WHO pre-qualification because it is a sort of stamp of quality.”

“To get this, there is a review and assessment of all required safety and efficacy data that are gathered through the clinical trials. WHO will do this for any candidate vaccine.”

But even if things don’t work out with the Russian candidate, Jasarevic said, there are many other vaccine candidates in Phase 3, and beyond.

“We are encouraged by the speed by which several candidate vaccines have been developing and as we have been always saying, we hope some of these vaccines will prove to be safe and efficient,” said Jasarevic. “Accelerating progress does not mean compromising on safety,” he said.

However, Dr. Ali Nouri, a molecular biologist and President of the Federation of American Scientists, slammed Russia’s decision as “reckless” and insisted that Russia’s vaccine is “well behind” the biggest western and Chinese competitors…CLICK for complete article

Jobs Report Doesn’t Say Much Amid COVID Uncertainty

U.S. employers added 7.5 million jobs in May and June, following a devastating April in which millions filed for unemployment benefits. But July is the tricky month because the trend has failed to continue at the same pace making it look like the pandemic surge is now threatening the recovery momentum.   Even though the Department of Labor will release official data by the end of the week, Dow Jones estimates that 1.26 million jobs were added in July.

That might sound fantastic, but the resurgence of the virus added new volatility to the outlook and economists now fear new layoffs.

Last month, medical experts called for a restart of the COVID lockdown as the United States adds tens of thousands of new cases daily. Twenty-two states, including Washington, Michigan and California, have imposed new restrictions, resulting in fresh layoffs.

As for the previous two months, the healthcare, logistics and construction industries presented with the highest demand for new workers.

In June alone, employers added nearly 5 million jobs. Of those, the leisure and hospitality sector dominated with 2.1 million jobs, while retailers added 740,000 jobs, and education and health services opened up 568,000 jobs.

Compared to the five-decade-low 4.4% unemployment rate we saw in early March, the current rate of 11% looks great, with the number of unemployed persons falling by 3.2 million to 17.8 million, according to the US Department of Labor…CLICK for complete article

Seth Klarman: ‘Little Evidence Of Thought’ Behind Stock Market Rebound

Billionaire hedge fund value investor Seth Klarman is extremely skeptical of the stock market rebound off the March lows.

In his recent second-quarter letter to investors Klarman, who manages the $30 billion hedge fund Baupost, said a combination of faulty investor psychology and an enabling Federal Reserve are driving stock prices higher while the real economy sputters.

The SPDR S&P 500 ETF Trust is now up 48.6% since March 23, yet the economy has lost more than 1 million jobs per week for 20 straight weeks. S&P 500 earnings are down 35.7% so far in the second quarter, while revenue is down 9.6%.

Psychology And Economics: In his letter, Klarman said investing is a combination of psychology and economics, and the two factors have diverged significantly in the past few months. He said investors seem to be relying on some vague idea that the US economy is “opening up” as a green light to buy stocks without even considering valuations.

“There is little evidence of thought as to whether the price of a security already reflects current and projected future news flow, or whether the opening up of the economy might be premature, a sign not of strength, but of impatience, lack of resolve, and poor judgment,” Klarman said.

Since 1982, Klarman has been one of the most consistent investors in the market, delivering gains in 31 of his fund’s first 34 years.

Fed To Blame: Klarman is known for his long-term, value-oriented investment style. Because he rarely comments publicly or grants interviews, followers must piece together his philosophy based on tidbits of insight he has provided throughout the years…CLICK for complete article

Tesla Prepares Massive Retail Expansion Worldwide

Tesla looks to significantly expand its retail and sales presence in North America, China, and other countries, as it is gearing up for increased sales over the next years, Electrek reports, citing job listings and sources.

Tesla, which has backtracked on its idea from last year to sell cars only online, is now looking to open retail locations in Tucson, Arizona, El Paso, Texas, Milwaukee, Wisconsin, and Smithtown, New York…Click for full article.