Having abandoned the U.S. economy for decades, the Banana Republican party is now attempting to put the economy first while keeping corporate profits at all time highs. Unfortunately, that is an impossible task. What the wise man does at the beginning the circus clown attempts at the end...
Latent economic nationalism should come as no surprise given the carnage of past decades. Trump himself was elected on the highly successful "deaths of despair" campaign strategy. At the same time, Bill Gates was informing all of us indolents that "by almost any metric the world is better than it has ever been". The only way to explain this chasmic disconnect is via the trade-off between multinational profit and the U.S. economy. Conventional wisdom assiduously believes that they are one and the same, whereas in the age of industrial arbitrage they are a zero sum game. Corporate profit margins have increased at the EXPENSE of the U.S. economy. Even Trump half gets it. He still doesn't comprehend the part that unwinding the multi-decade Globalized arbitrage scheme is not accretive to corporate profit. Quite the opposite. Which is why he is busy re-constructing the 747 in mid-air while parts are flying off in every direction. Trump himself has adopted a ludicrously uninformed zero sum mindset towards trade, not realizing that weakening China economically is reducing U.S. exports and widening the trade deficit. Nor does he understand the fact global risk assets are now 100% inter-twined via brokerage accounts. Margin calls in one region are met with selling in another.
You don't have to be a genius to realize that when this gong show final explodes that economic nationalism will win out over corporate globalism. Most Americans are not dependent upon the stock market for their livelihood, they are dependent upon their wages and incomes. Far worse yet, the stock market bubble was inflated merely as a result of yet another global debt binge which fueled both consumption and investment. When those misallocated investments implode "unexpectedly", there will be nothing to show for it.
"At first glance, it looks like a $9 trillion time bomb is ready to detonate, a corporate debt load that has escalated thanks to easy borrowing terms and a seemingly endless thirst from investors. On Wall Street, though, hopes are fairly high that it's a manageable problem"
Stocks are floundering, credit spreads are blowing out and concern is building that a combination of higher interest rates on all that debt will begin to weigh meaningfully on corporate profit margins. "There is angst in the marketplace. It's not misplaced at all,"
In a nutshell, corporations are massively leveraged to collapse:
Corporate debt / GDP:
Once economic nationalism becomes the dominant global paradigm, it doesn't take much imagination to consider what will happen to corporate profits and hence stock market valuations. Even those bears saying that "cyclically-adjusted" valuations are far above historical norms are totally missing the point. This is not a cycle anymore. When the largest generation in U.S. history perched at the apex of retirement realizes that they have neither wealth nor income for retirement, the circus will be over and the clowns will be silenced.
The new economic paradigm will be predicated upon quality jobs and incomes not casino gambling. Even Billy Gates will get it this time around.
Don't worry about Wall Street, there won't be one.
“Ask the working people in Ohio, Pennsylvania and Michigan about Wall Street. Wall Street supported and cheered on the export of their jobs. To hell with Wall Street if they don’t like it."
