Tuesday 31 May 2022
Salesforce.com (CRM), Internet Software & Services. Investor Relations: Q1 revenue was +28% higher, dEPS down from $0.05 to $0.03, or adjusted down from $1.21 to $0.98. The price/earnings is $175.98/$0.97 =181, or forecast adjusted EPS $175.98/~$4.75 ~37. and price/sales is $175.98/$27.54 = 6.4. They have struggled for years to make a profit
"With a possible bear market facing us, I decided to dig a bit deeper into some of the technicals underlying the #SP500. Asking how far it will go and when might we expect it to turn around? Hopefully, some may find it useful/interesting." - Twitter.
New Zealanders Flee High-Tax, Anti-Freedom Policies - Youtube.
The problem with Europe wanting to boycott Russia's oil, is that Russia was the third biggest producer at 11.3B barrels per day (Worldometers). The other countries need to increase their production substantially.
Monday 30 May 2022
Fed Governor Christopher Waller says he’s prepared to take rates past ‘neutral’ to fight inflation - CNBC. Interest rates need to rise to where the demand for credit declines to levels the market can provide without QE (Quantitive Easing).
Saturday 28 May 2022
"A security staff shortage has caused long queues to form at Amsterdam's Schiphol Airport. Many travelers are missing their flights as a result. KLM has also suspended ticket sales through at least Sunday. Take a look at the chaos:" - Twitter. Over the years the public had to park further away, and walk greater distances through the terminal, with longer delays. This is what happens when there is no competition.
From 23 Des 2020: How much does it cost in fuel to drive a 42' motorhome from Arizona to Florida? - Youtube. That was $0.73/mile or $0.45/km. The price of diesel is just over double that now:
The US stock market (blue) is down -17% from the Dec peak. It has another -40% to go to reach Gross Domestic Product (red).
The big question for the US economy is whether the inflation due to the big increase in Money Supply (blue) will push Gross Domestic Product (red) higher. The difference between die two is the velocity of money flow. If the Money Supply (blue) moves above GDP (red) it will be the first time velocity falls below 1. It reached a peak of 5 in 1880 (FRED). The Federal Reserve Bank wants to reduce the Money Supply (blue), but inflation momentum could make GDP (red) continue higher.
Friday 27 May 2022
Factset: "For Q1 2022, the blended earnings growth rate for the S&P 500 is 9.2%. If 9.2% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (3.8%)". "The blended revenue growth rate for the first quarter is 13.6% today .... If 13.6% is the actual growth rate for the quarter, it will mark the fourth-highest revenue growth rate reported by the index since FactSet began tracking this metric in 2008"
Higher gasoline prices in the US isn't necessary bad for the economy as a whole. If the oil was produced in the US, people in the oil industry would be wealthier, whilst everybody else would be poorer. If spending by the wealthier people makes up for the lower spending by the rest, the economic output remains the same.
People who watch the daily moves in the stock market are like passengers on the deck of the Titanic watching every ocean wave.
Thursday 26 May 2022
Costco Wholesale (COST) warehouse retailer Investor Relations: Q3 revenue +16.2%, EPS up from $2.75 to $3.04, P/E = $464.99/$12.7 = 36.6.
Gap (GPS), apparel retail. Investor relations: Q1 revenue -13%, EPS down from $0.43 to -$0.44 loss. Low long term growth.
Why is gold not higher? This is how miners are responding to rising costs, flat gold price - Youtube.
There are a lot of marginal mines, because too many people are trying to make money out of gold mining. It is only the practical application of gold that creates sustainable demand, which the senior miners with their bigger margins can provide. When the market is dominated by investors, the price of gold could go up and down according to the mood of the investors. Around 1999 the gold price collapsed to $254/oz and then shot up to $1890/oz in 2011. A collapse in the gold price is required to force all the marginal mines out of business. Above-ground stocks - Gold.org: Jewellery ~94,464t, 46%. Bars and coins (including gold backed ETFs) ~45,456t, 22%. Central banks ~34,592t.
Wednesday 25 May 2022
Snowflake (SNOW) cloud service, SEC first quarter revenue growth +85% (+110% a year ago), earnings loss per share down from -$0.70 to -$0.53, price/sales = $128.79/~4x$1.25 ~26. The share price is down from a peak of $392 in Nov last year.
Tuesday 24 May 2022
"Inflation is out of control. Inflation expectations are getting out of control. Markets are imploding because investors are not confident that the @federalreserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job, and that is what" - Bill Ackam, Twitter. Inflation is the main driver for the stock market. It is falling because it ran ahead of inflation.
Social Media Stocks Sink to Erase $160 Billion on Snap Warning - Bloomberg.
Does trickle-down economics actually work? - Ted Talks.
The price of wheat (blue) has shot up. Compared to the inflation on medical care in the US (red), wheat farmers increased efficiency enormously.
Monday 23 May 2022
"U.S. spring #wheat planting is advancing at the slowest pace in more than 20 years and was only 49% complete as of Sunday. Average for the date is 83%. Minnesota is only 11% planted vs 90% avg. North Dakota 27% vs 80% avg. Those two states grow two-thirds of the U.S. crop." - Twitter.
"The Federal Reserve system employs 785 economists. Incredibly, not one predicted the explosion in the US money supply would result in inflation. That’s why no one believes any of the Fed’s inflation narratives - they change with each passing day. The Fed has zero credibility." - Twitter. What is puzzling is how they expected to withdraw the Quantitative Easing (QE) money without a Great Depression.
From 19 Aug 2021: Carl Sagan testifying before Congress in 1985 on climate change - Youtube. Stationary air (even without the 0.04% carbon dioxide) is an excellent insulator, which would heat up the planet. The earth is cooled down by the convection of air containing moisture from the surface to the atmosphere. It is properties of water that determine the earth's temperature.
From 7 May 2022: Off Grid Micro Hydro - The Dream System!? - Youtube.
‘The next era of humanity’s technological development’: U.S. and its Asian allies get serious about semiconductors - CNBC. Everybody wears a face mask except Biden. The president must be protected from peasants spreading germs.
Will the US dollar remain strong despite all the money created? Countries with exclusive exports tend to have strong currency, for example South Africa until about 1980 when it was the main exporter of gold, or Australia due to iron ore exports. Insofar as the world are willing to pay a higher price for US brands, like Apple, the dollar could remain strong. The world has been moving away from US products for decades due to the high prices.
The second question is why countries with strong currencies do not import more goods. It could be due to import restrictions by government, or other countries not providing appropriate products. It so happens that there were sanctions against South Africa due to apartheid, which forced South Africa to be more self-sufficient, and import less.
Sunday 22 May 2022
'From the @FT editorial, "for #markets, #inflation fears are joined by #recession risks." Consistent with what I detailed last week on the latest leg down in #stocks being a new (growth related) phase of the selloff rather than a continuation of that driven by financial conditions' - Twitter.
Saturday 21 May 2022
From 16 Aug 2020: World’s Most Extreme Railway | Megastructures | Free Documentary - Youtube.
Debt supplied by the European Central Bank (blue) now makes up 56% of the money in circulation (red). It has the same effect as the money government finance departments print every year. It the money were taken out of circulation, it would have a massive economic impact. So, it is likely that the money increase will be made permanent. Money supply increased 49x over 52 years, or 7.8% per year. Thus money from 1970 is now worth 2% of what it was. Over the last 3 years the supply increased by 7.7% per year, the same as the long term rate.
Friday 20 May 2022
Deere (DE) farming equipment, Investor Relations: second quarter revenue +10.9%, EPS up from $5.68 to $6.81, price/earnings is $348/$19.17 = 18. Long term revenue growth is low, which could mean lower growth going forward.
"Stocks are getting cheaper. Shiller PE Ratio is back to 30, right around pre-1929 crash levels. $SPX" - Twitter.
The Bitcoin price is precariously hanging onto the $30,000 level.
Boeing Starliner Launches Successfully, Headed For Space Station - ExtremeTech.
Stock markets need a fundamental reason to switch from a downtrend to an uptrend. High inflation and the possibility of higher interest rates will remain a negative threat for a year or more. The effect of US Federal Reserve Bank's Total Assets going down remains to be seen:
Thursday 19 May 2022
Europe car sales slump 20% in April on supply chain woes, dashing recovery hopes - Automotive News Europe.
From 17 May: No cars were sold in Shanghai in April as zero-Covid policy hammers activity - CNN. So why is the palladium price staying high? (Palladium Prices - Interactive Historical Chart - Macrotrends)
Personal Consumption Expenditures (PCE) - Investopedia: "In 2012, the PCE Price Index became the primary inflation index used by the U.S. Federal Reserve when making monetary policy decisions."
The never-ending story for the US economy is: What happens to all the money created? It has not yet appeared as an increase in Wages (red). The two big components of Gross Domestic Product (GDP) is personal consumption, and government spending. In 1980 Compensation of Employees (red) was 81% of Personal Comsumption Expenditures. In 2021 it was 70%. Government social benefits (blue) are also shown, which would be part of government spending, and thus not part of personal consumption expenditure (green).
Wednesday 18 May 2022
"Some of you have noticed this image I took on Mars. Sure, it may look like a tiny door, but really, it’s a natural geologic feature! It may just *look* like a door because your mind is trying to make sense of the unknown. (This is called "pareidolia") " - Curiosity Rover - Twitter. Elon Mush has already started digging tunnels in Mars.
Microsoft announces changes after cloud computing complaints - Fin24. Governments fine foreign companies.
"In the past I voted Democrat, because they were (mostly) the kindness party. But they have become the party of division & hate, so I can no longer support them and will vote Republican. Now, watch their dirty tricks campaign against me unfold …" - Elon Musk - Twitter. Will Musk buy the Republican Party?
Tuesday 17 May 2022
How to sidestep a tax bomb when selling your home - CNBC.
"#Powell claims that to bring #inflation down economic growth must be slowed. That's not true. An economy that is really growing increases supply, which keeps prices low. Our problem is too much consumption and not enough production. The #Fed needs to slow spending, not growth!" - Twitter.
Walmart (WMT) Investors: Q1 revenue +2.4%, shares -2.3%, dEPS down from $0.97 to $0.71, PE = $131.37/$4.65 = 28. Relative to inflation, Walmart is shrinking away.
By comparison, Costco Wholesale (COST) for Q2 to Feb had revenue growth +15.9%, and dEPS was up from $2.14 to $2.92. The share price is very expensive at $490.44/$12.41 = 40.
Politicians try to solve all problems by handing out more money, instead of dealing with the underlying issues.
NATO should have been scrapped decades ago. Instead the old people who still live in the past, perpetuate military confrontation.
"Sri Lanka is in real chaos. Hungry residents are literally preying on wealthy residents and officials, burning their homes and cars. The police open fire to kill. More than 200 people have already been killed." - Wittgenstein@backtolife_2022, Twitter. So all the tea they produce doesn't relax them?
The revenue of all businesses cannot exceed gross national product, which is practically the same as gross domestic product. The profit margin can vary over time, but is fundamentally limited as percentage of sales. Therefore, US Corporate Profits (blue) are linked to Gross National Product (red). Most of this growth is just inflation, driven by Money Supply growth (green).
Corporate Profits (blue) has followed Money Supply (green) higher, but Gross National Product (red) stayed low. Companies have apparently already profited from the increased money supply. When Gross National Product growth (red) exceeds Money Supply growth (green) it means the money in circulation is used more often (velocity increases). Since 2011, Money Supply (green) increased a lot, but produced little Gross National Product (red).
Usually Money Supply (green) leads, and Gross National Product (red) follows. Thus, inflation will likely lift Gross National Product (red) up on the chart above.
Monday 16 May 2022
"When I read about the ‘algorithm’ of @terra_money it sounds just like a crypto version of a pyramid scheme. Investors were promised 20% returns backed by a token whose value is driven only by demand from new investors in the token. There is no fundamental underlying business." - Bill Ackman, Twitter.
"YARDENI RESEARCH QUICKTAKES (#fiscalpolicy #federaldeficit, May 16, 2022). It's good to be the King! You can spend lots of money by printing it. If you still have a fiscal deficit, the resulting inflation can help to narrow it by boosting tax receipts. He…" - Twitter.
"Multiple shocks have caused economists to revise inflation forecasts for U.S. again...and again...and again" - Twitter.
"Striking to see such large bid-offer spreads persist" - Twitter. Banks make a big profit on currency spreads.
The internet is full of stories about India suspending wheat exports. What is more shocking is that a country with 1.4 billion people is able to export any food. In the past wheat exports have shot up for a few years, before dropping back to zero: Indexmundi.
Everybody refers to the decline in the price/earnings ratio of the US stock market. The profit denominator shot up in 2021. If it falls back, the stock market needs to fall further. It is just a matter of time for inflation to make the high profits permanent.
Sunday 15 May 2022
From 12 May: Will The 2020's Be Worse Than The 1970's? - Youtube.
From 6 May: Passive Income through Stock Trading - [StockCast Ep. 75] - Youtube.
From 9 March 2020: Kevin Pollak Does Woody Allen, William Shatner, and Columbo | Carson Tonight Show - Youtube.
From 8 Feb 1975: The Dean Martin Celebrity Roasts: Lucille Ball - Season 1 Episode 3 (2/8/75) - Youtube.
Saturday 14 May 2022
The Bitcoin chart (Tradingview) doesn't look good. This is no technical analysis, but there is vast open space between the $30,000 support level, and last symmetrical triangle around $10,000.
From 6 May: The Bad Things That QT3 Will Bring.
Aluminium at $2788/ton is only up 2.0% per year since the average $1500 31 years ago. It is a bargain price. Trading Economics.
Musk says $44 bln Twitter deal on hold over fake account data - Reuters. His offer is dependent on how many joints of marijuana he smokes.
US M2 Money Supply growth has declined to 8.61% on 4 April, more than a month ago. It does indicate that the demand for debt has declined. The inflation rate will decline over the next two years. The high growth of 22-27% must still work its way through the economy. On this chart, money supply has never shrunk (growth below zero). Price increases will be permanent.
Total US debt growth has dropped to 6.4% in Q4 of last year. The debt tends to grow at an ever increasing rate, not a good sign.
Money supply growth beyond the usual ~6% money printing every year, is the result of the demand for debt exceeding the supply. The Federal Reserve Bank has been supplying the shortfall through Quantitive Easing (blue). It has started to flatten. When the Bank no longer act as lender, interest rates (red) need to rise to balance the supply and demand for debt. In 2019 they increased QE again, just before Covid pandemic. Although the Reserve Bank debt is a small percentage of total debt, it seems to have a big impact on the economy, especially the stock market.
Friday 13 May 2022
“I do believe stagflation, unfortunately, is the baseline, @elerianm tells @FerroTV. “We're going to see notably lower growth & *frustratingly high inflation* for this year and into next year. Whether we get something worse depends on the soft landing debate for the Fed.” - Twitter.
S&P 500 Revenues & the Economy - Yardeni.
Powell Will Not Be Able to Slay the Inflation Dragon Like Volcker Did - Youtube.
Crypto currency Terra (Luna) price fell -100% in one day: Coingecko. It ended at $0.00002915. It was $81 a week ago. The concept of crypto currencies died in a week that ended with Friday the 13th.
From 26 Sep 2020: Chemosphere / Malin Residence by John Lautner, complete overview and Walkthrough - Youtube.
From 7 May: FIRST CLASS TRAIN Across Peru on the “Andean Explorer” - Youtube.
Thursday 12 May 2022
"The 3 THINGS you should know about the new black hole image" - Twitter.
"PPI for finished goods continues its climb, rising +15.7% y/y in April" - Twitter.
"Crypto losses now equal $1.7 trillion. The 2007 subprime mortgage market was $1.3 trillion. It's highly likely that Crypto will be the catalyst for accelerated global collapse. Weekend risk is HIGH." - Twitter. And governments did nothing to protect the public from the Ponzi scheme.
"Here's my market prediction. Take this with a grain of salt mine: Soon this slow drip turns to meltdown and the gong show begins. Market crashes. VIX spikes. Fed goes neutral. Dead cat bounce. Bounce fails. MASS PANIC. BROKERS OFFLINE. Fed panic. TRADABLE LOW. Public bails." - Twitter. Investors who still show a profit after the big rise in the stock market, are willing to sell al the way down. When most people see negative returns, they resist selling.
Where is the gold price going? The price broke upwards out of a symmetrical triangle at the beginning of the year. It is heading down now due to a stronger dollar. In South African Rand it is still in an uptrend (Goldbroker). Gold mines are making small profits. It doesn't look like there is a big demand for gold. Eventually inflation will increase mining costs, and the gold price will have to go up. The dollar price should be much higher over 10 years, as US money supply has shot up, and is not likely to decline. Barrick Gold (GOLD) Q1 revenue -3.5%, EPS down from $0.30 to $0.25, net profit margin 16%, price/earnings = $20.49/~4x$0.25 ~20.5.
From 2 May: No restrictions on unvaccinated individuals; no one can be forced to take jab: Supreme Court - India TV News. "The Supreme Court underlined that bodily autonomy and integrity are protected under Article 21 of the Constitution." Many countries, including the European Union, have the same protection in the constitution, but the constitution is ignored.
There's No Such Thing as a Free Lunch (Milton Friedman) - The Turney Collection - Libertarianism.org - Youtube.
Newsradio-S2E11 - Youtube.
Wednesday 11 May 2022
"The wind is very tough this side, be safe, be strong, its going to be alright" - Twitter. Some stock valuations did not make sense for a long time. Some still look expensive.
Nothing can fix inflation now, ‘economic stupidity’ is underway by the Fed, Biden – Steve Hanke - Youtube.
Fed “Doesn’t Care” About Inflation, It’s a Mirage to Prop U.S. Dollar at All Costs Says E.B. Tucker - Youtube.
From 27 March 2021: Bob Hope House by John Lautner, complete overview and walkthrough - Youtube.
Tuesday 10 May 2022
When will the falling US stock market reach an attractive valuation? The S&P 500 price/earnings ratio is now 20.17 – Multpl. The earnings yield of 5.0% is low compared to inflation. The earnings growth rate for Q1 is 9.1%, and the net profit margin is 12.3% – Factset: "On the other hand, it will also mark the fifth-highest net profit margin reported by the index since FactSet began tracking this metric in 2008, trailing only the previous four quarters". The total investment return which consists of growth, plus dividend yield and share buybacks, must beat inflation.
Who is impacted the most by a rise in US interest rates? Government debt is 33.6% of total US debt (red), mortgage debt 13.3% (blue), corporate debt 13.2% (green), and consumer credit 5.0% (purple):
At what interest rate would the cost of debt start to impact US government finance? The Federal debt in Q4 of 2021 was $29,617B. At the present 2 year treasury yield of 2.72%, the annual cost is $806B. The annualized Q1 government expenditure was $5799B. The cost of the debt is now 13.9% of government spending, compared to the past ratio below. It already matches the 13.4% peak in 2018, but is below the 15.3% in 2006. The highest peaks since 1976 are around 22%.
There is little difference between the average US house price (red) and the price increase on the same houses (blue) ("The purchase-only index is based on more than 6 million repeat sales transactions on the same single-family properties"). It suggests people bought slightly smaller homes since 2018.
Monday 9 May 2022
Bitcoin has fallen back to $30,797. It remained around $9000 for many years until Sep 2020, and then shot up to $57,500 by Feb 2021. A lot of people bought at low levels, who want to sell to take profits.
"Disney stock is down 46% from its high in 2021, its largest drawdown in over a decade. $DIS" - Twitter. The price/sales is $107.31/~4x$11.94 ~2.2, and price/earmings $107.31/~4x$0.60 ~45. Peak profit was $8.36 in 2018. Speculators pushed the price too high in the vain hope of big profits from online streaming.
"Is the RV industry headed for a train wreck? Or is the sky the limit? Time to place your bets!" - Youtube.
The US trade deficit (blue) has shot up in March to $109.8B due to net capital inflow. It probably contributed to dollar strength (red), although there is no past evidence of a link.
Sunday 8 May 2022
"Wow. Rust removal..." - Twitter.
Hitting the Books: US regulators are losing the fight against Big Tech - Engadget.
Pajamas at work? AI startup offers deepfake wardrobe for meetings - Nikkei Asia.
Saturday 7 May 2022
Elon Musk says he after the Twitter takeover, he will be the CEO, software developer, content moderator, and janitor. And that is just on Tuesdays.
The word "bubble" is being used to describe everything that has increased in price. Most price increases are permanent. The official inflation rate for new vehicles in the US (blue) has been extremely low since 1997 when compared to M2 Money Supply growth (red).
How accurate is the vehicle inflation figure? The average new car cost $2752 in 1960 (Janetpanic). According to the official inflation rate, the average car should now cost 3.3x more which is $9082, a growth rate of 1.9% per year. The average car price is actually $47,077 now, which is 4.7% per year. Cars were much bigger in 1960, which would be more expensive to manufacture than today's small cars. M2 money supply has grown 7.2% per year.
House prices are relatively high, but is it a bubble? The average US house price to average wage ratio is at similar levels reached during the 2007-2009 subprime mortgage boom and bust.
As interest rates decline over decades, people could afford bigger homes (blue) with the same wages (red). Lumber (green), a major construction cost, increased at a similar rate to wages. People are dependent on low interest rates, otherwise housing is in a bubble.
Friday 6 May 2022
Judge dismisses Trump lawsuit seeking to lift Twitter ban - CNBC.
China Orders Government, State Firms to Dump Foreign PCs - Bloomberg. With the Western world losing manufacturing, they could end up losing component supply, and technical knowledge.
U.S. Senate committee passes antitrust bill pressuring OPEC - Reuters. "NOPEC would change U.S. antitrust law to revoke the sovereign immunity that has long protected OPEC and its national oil companies from lawsuits". The US has no legal authority over other countries.
The China Shanghai SSE Composite Index was down -2.3% in the morning. It has trended down since March.
An issue that is constantly raised is whether the US is in a recession or not. The most shocking chart of all time for the US and many other countries, is the way Gross Domestic Product divided by Money Supply has declined, as shown below. It has fallen from a peak of 2.2 in 1997 to 1.1 now. It means extra money was printed without adding more economic output. Every recession the curve takes a permanent dive down.
Normally if there is more money in circulation, and the quantity of goods remains the same, the price of each item increases. Then the declining curve represents real GDP. The official explanation is that the price of goods have not increased, people have spent less of the money. It is possible that an aging population saves more for retirement. Eventually these savers want to spend the money, which must result in inflation.
Since the main driver for the economy is inflation, there should be a correlation between money supply growth (blue) and corporate profit growth (red). Profits are extremely volatile, and money supply is shown magnified to see changes more easily. Sometimes the effect of extra money is immediate, and other times it is delayed. There has been a short, sharp profit response to the big increase in money supply (blue) in 2020. The economic benefits of more money runs out as inflation follows.
Thursday 5 May 2022
The Dow Jones fell -3.1%, S&P 500 -3.6%, Nasdaq 100 -5.1%. The S&P 500 at 4146.87 is almost back to the low of 4131.93 on 29 April. If it falls below that, it would make lower lows. The volatility is caused by short term trading.
Over 500 kg of cocaine found in coffee delivery for Nespresso - Reuters.
"Buy Winnebago as the brand is the 'unicorn' of RVs and shares are cheap, MKM Partners says" - Twitter.
SEC warns 80 more Chinese companies of impending U.S. delisting - Nikkei Asia.
The US Federal Budget Deficit (red) was worse in 1942-45 during the Second World War than in 2021. Also shown is the inverse of the Federal Net Outlays (blue), which apparently is government spending. When will the budget be balanced?
Wednesday 4 May 2022
REVEALED: George Soros, Clinton and Obama staffers and European governments are behind anti-Musk campaign to force big corporations to boycott Twitter - after Elon demanded to know 'who funds these organizations?' - DailyMail UK.
Mars helicopter spots rover’s landing gear debris - Earthsky.
"A bit of context ahead of the Fed meeting.. The peaks in the Fed Funds rate are lower and lower and lower due to weakening demographics and an increasing debt load" - Twitter.
"To conserve water, Nevada passed law last year that makes “non-funtional” grass that the water police determines only serves an aesthetic purpose to be illegal." - Twitter.
Regeneron Pharmaceuticals (REGN), Biotechnology. Investor Relations Q1 revenue +17%, dEPS down from $10.09 to $8.61, or non-GAAP up from $9.99 to $11.49. The price/earnings is $647.80/$70.60 = 9.2.
Uber Technologies (UBER) Investor: Q1 revenue +136%, primarily the acquisition of Transplace by Freight (-18% lower last year), adjusted EBITDA $168M/$6854M = $0.0245 per share, dEPS -$3.04 loss versus -$0.06 last year. The revenue per share is $3.50 x4 = $14 annualized. The share price is down -6.1% to $27.67.
The ECB (European Central Bank) refuses to increase interest rates (red) to the same level as the growth in money supply (blue). Since 2011 interest rates declined (red) and money supply growth increased (blue), a sign of hyperinflation developing. The same thing happened after 1995. The money supply growth ended with the US Great Recession of 2009. Every cycle the population becomes more impoverished, but they keep voting for the same politicians.
Tuesday 3 May 2022
"10-year US Treasury #yield hits 3%!" - Twitter.
India and Pakistan heatwave is 'testing the limits of human survivability,' expert says. You can blame the clean air movement. The earth heats up until smoke is generated to seed the clouds, which completes the earth's natural temperature regulation.
What happens next to the US stock market? Stock market investment is determined by a combination of two factors: growth + dividend yield (or share buybacks). When growth is high, say 30% per year, then a price/earnings ratio of 30 is reasonable. When growth stops, only the profit yield (the portion returned to share holders) remains to support the share price.
Revenue growth is represented here as nominal Gross Domestic Product growth (blue). The growth was mostly 4 to 5% for two decades. Growth tumbled in 2020, and then shot up in 2021. The rate going forward depends on money supply growth, which is now subject to higher interest rates. The main driver for the stock market is inflation. Corporate profit margins (red) was unusually high for two decades, due to a lack of competition. In the past profits reached a peak, and then declined into a recession (grey bands). Profits have reached a high level, and are likely to go down.
Monday 2 May 2022
Investing During Stagflation - Lynalden.
How VR Helps Train Postal Workers In Sweden - Weforum. Do the Swedes still use the postal service?
Soft commodity prices have not kept pace with money creation. US Potato Chips (Blue) are still great value, only up by 2.5% per year, compared 6.6% per year for M2 Money Supply (red). Hence the expression "As cheap as chips".
Something else you can sink your teeth into is US Ground Beef (blue) up 3.5% per year, compared to 6.3% per year for M2 Money Supply (red):
At least the price of US Sliced Bacon (blue) has increased 4.0% per year for the last 42 years, compared to 6.6% per year for M2 Money Supply (red):
The bubble in the stock market (blue) can't be compared to the increase in property prices (red):
Sunday 1 May 2022
'Warren Buffett said US financial markets had become “almost totally a casino.” He failed to mention that the Federal Reserve has been the dealer to make it all happen.' - Twitter. Stock market speculation doesn't require low interest rates. The extreme volatility of stocks has made it too high risk for the average person to invest in.
From 27 Jan 2022: The Cost of Space Flight Before and After SpaceX - Visual Capitalist.
"The world's biggest shipping hubs" - Twitter.
From 11 Nov 2020: You don’t have to own houses to profit from real estate. Here’s how wealth advisor Josh Brown invests in different properties - CNBC. The big advantage of property investment is the ability to leverage inflation. On a home with an 80% mortgage, the owner gets 100% of house price increase (the mortgage remains constant), on a 20% down payment, which is a leverage of 5x on inflation. You can't do it with REITs (Real Estate Investmenr Trusts), except to the extent the companies invest in property with debt. Besides that, you have to pay tax on the income required to rent a home, and the capital gains on a primary residence is usually tax free. The average person has no choice but to own a house.
House prices (blue) don't fall much because inflation permanently increases the cost of construction. The US average house price reached a peak of $322,100 in 2007. It fell -20% to a low of $257,000 in 2009. By 2013 the price had already recovered back to the previous peak. The price has shot up to $507,800 in Q1, which is 36% higher than Q2 of 2020. There has been an enormous increase in money supply (red) since 2020. Unless money supply (red) shrinks, house prices will probably increase long term.
The US, EU and most governments can't afford to pay real interest rates on government debt. Whilst the interest rate on loans is below asset price inflation, it will remain attactive to borrow. It is likely that the demand for credit will continue to exceed the supply, and more money will be printed.
When property price growth (blue) exceeds the mortgage rate (red) the investor makes more in asset appreciation than the cost of the debt. That is for year one. The mortgage is usually a fixed amount. As the house price inceases, the percentage increase required declines every year. That is besides the potential rental income.
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