Given the Pavlovian conditioning for monetary heroin instilled over the past decade, it was inevitable that recession would be met with speculative euphoria. Contrary to ubiquitous belief, low interest rates will not prolong this cycle, low interest rates are ACCELERATING collapse...
Global gamblers are confronted with the competing dichotomy of collapsing growth and increasing central bank monetary heroin. For example in Australia the major stock index just hit the 2008 high, while the Aussie Dollar - key indicator of global growth - is now at cycle lows.
Gamblers are now betting it all that Trump is back on his meds this week:
Global gamblers are confronted with the competing dichotomy of collapsing growth and increasing central bank monetary heroin. For example in Australia the major stock index just hit the 2008 high, while the Aussie Dollar - key indicator of global growth - is now at cycle lows.
Gamblers are now betting it all that Trump is back on his meds this week:
The key to what is wrong with this pseudo-economy is embedded in this article declaring the death of value investing.
The article states that technology is destroying the competitive advantage - "moats" - of legacy industries. But it's not technology alone doing the damage - it's technology funded with cheap - nearly free capital - that is destroying legacy industries. It's automation with a nearly infinite ROI, compliments of cheap money.
Meanwhile, these new Tech industries don't create nearly as many jobs as they destroy. Think cloud computing currently devouring its way through legacy IT departments by centralizing technology that used to be distributed across multitudes of organizations. Now taking place across every systems platform from mail and messaging, to collaboration, CRM, Finance, HR, servers, storage. All of it. Which means that these subsidized job destroyers are accelerating economic underemployment, which doesn't show up in the bogus employment rate, but shows up as economic deflation. Which in turn feeds lower interest rates, leading to more "free" automation.
The article also talks about the low discount rate raising the implied present value of high growth companies. Which again has accelerated collapse. Think Amazon which has had no cumulative net profit for 25 years, yet has been allowed to destroy legacy retail at an "apocalyptic rate". In any other era that was considered predatory competititon. All because it was accorded an outlandish valuation premium and unlimited access to capital.
To apologists for the system of course, all of this uncreative destruction is merely proof that the system "works" as designed. Not withstanding record amounts of global debt with negative yield (interest rate). Meaning lenders are paying borrowers to borrow their money.
Where does it all end?
It ends with the widely believed delusions that low interest rates are "great for stocks" and that "value investing is dead" therefore profits 'no longer matter"- beliefs which have systematically funneled more and more capital into the riskiest high growth momentum stocks. To the point that unprofitable IPOs are now going public at the highest rate since Y2K, and the growth/value premium is the widest on record.
All careening at full speed into the brick wall in the cycle when not only do profits matter, but free cash flow is the ONLY thing that matters. An ever-increasingly more lethal bull trap with no way out, set while gamblers celebrated the return of easy money.
The two words that should never be used in the same sentence by anyone who aims to keep their wealth intact.
All careening at full speed into the brick wall in the cycle when not only do profits matter, but free cash flow is the ONLY thing that matters. An ever-increasingly more lethal bull trap with no way out, set while gamblers celebrated the return of easy money.
The two words that should never be used in the same sentence by anyone who aims to keep their wealth intact.
