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3,000 Death Thursday – It’s Like 9/11 Every Day!

3,157 Americans were killed yesterday.

Not so much by a virus but by incompetence and lack of caring and deriliction of duty.  We are THE WORST IN THE WOLRD in infections and death rate and no, America doesn't have some special brand of the virus – we just have a special brand of leadership that puts their own interests ahead of the country's because, as Trump says – he's immune.   

Immune from suffering because he can afford the best doctors for himself and his family – he even has access to treatments that are not even legal for the rest of us.  He's also immune from compassion – we've seen that and now he appears to be immune from prosecution as he's trading pardons for cash and other favors.  All this while 1 American Citizen dies every additional minute he spends not doing something about the virus.  

And this is nothing as 200,070 additional Americans were infected yesterday and 100,000 of us are in the hospitals with yes, 3% of those people dying daily.  Higher case count leads to more hospitalizations which leads to more deaths – who would have imagined, right?  Health experts project the number will continue to climb, as Thanksgiving gatherings are expected to have accelerated the rampant spread of the virus this fall. Another metric suggests deaths could surge by mid-December.

New Covid-19 hospitalizations follow new coronavirus cases, typically within a few weeks. Soaring cases nationally have accelerated beyond public-health agencies' ability to rein in contagion by tracking infections to head off further spread, said Jennifer Nuzzo, an epidemiologist who leads the Johns Hopkins University Covid-19 Testing Insights Initiative.

I hate to be that guy but this is a total catastrophe and, like some sort of cartoon villain President, Trump is STILL ignoring the virus and the Senate is STILL blocking stimulus – even as the Democrats have capituated and said they will accept less than HALF of the $2.4Tn they were looking for.  Why won't the Senate pass the bill?  Because it won't help Trump, it would only help Biden so they don't give a crap.  

Funding for State and Local Governments to fight the virus is out of the GOP bill (because then Biden might be credited with getting the virus under control down the road and they don't want that) and funding for Food Stamps has been completely cut out by the Republicans.  Not reduced – cut out.  Even $900BN is the "compormise bill" that most Republicans aren't backing.  The office Senate Republican proposal is for $519BN, mostly more money for "small business" and legal protection for Big Business so they can't be held liable for forcing their employees to work in unsafe conditions.  

If this were ancient Egypt the Republicans would address the plagues by buying better whips for the overseers and handing out tax breaks for pyramids.  

The market’s mood to justify the rise is to assume every-thing is golden – any old stock with any kind of improbable prospects is suddenly a potential winner as we “rotate” into fundamental stocks producing real income, and stocks trashed by Covid which will Phoenix-like fly (or float) again. To my jaundiced eye… it all looks very bubblicious. What is really going on in Stocks?

Ask a bull and they will tell you underlying stock strength is due to the vaccines, the end of the pandemic on the horizon, repressed consumer spending, the likelihood of ongoing global stimulus, and that momentum means stocks are going higher. 

Ask a bear and they will quote you the Peculiar Madness of Crowds, the unsustainability and froth, rising debt, risks and bubble conditions. 

Ask a realist who actually understands markets, and they will agree with elements of both perspectives, but explain the real issue is the long-term distortion on prices caused by ultralow rates and ongoing policy implications. Too much money chasing too few assets (exactly the situation in stocks) will always push up prices. We’ve come to accept runaway stock prices despite the current pandemic recession. It’s called Financial Asset Stagflation! The reality is market distortions are the dominant force driving stock prices higher… and that’s difficult to accept when you believe stocks represent fundamental value at these levels.

: Stocks are massively overvalued. Bonds are massively overpriced. But they are likely to remain there for a while yet because of ongoing policy distortions.  As noted by Zero Hedge:

The laws of financial gravity are immutable. There is a relationship between global wealth, growth and the value of stocks and bonds (financial assets.) There is balance that sets risk/reward returns. These are all out of sync at present – stock market values are out of all proportion to global growth prospects, while investors are now being forced to accept ever greater risks for lower returns.  Distortions can only last so long before reality bites and overcomes – often violently.  

Central banks, QE infinity, government stimulus and ultra-low rates are pump priming the “Bubble Triangle”. It’s at its clearest in the peculiar price madness around stocks like Tesla and the confabulation that is Bitcoin, but the whole market is heading towards an ecstatic bubble dénouement. 

Market behaviour is a curious thing. The market responds predictably to the stimuli it receives. The forces that make demand for a commodity or a financial asset go up and down are understandable: you can predict how much copper wire will likely be needed and you how much is available; demand and supply. You trust the authorities to regulate the market to ensure it is honest, transparent and fair.

But you can’t rationalise the psychology and behaviour of crowds to these stimuli. Economists have tried to rationalise expectations – it doesn’t work. The madness of investors is infinitely surprising. Markets are not rational – the are reflections of beliefs driven not by uncommon common sense, but largely by the hope of returns and profits. (The level of hope tends to move inversely to the strength of the economy.) As I’ve written so many times.. Hope is never a Strategy. 

We have a whole host of factors fuelling bubbles at present:

1) The belief markets will be kept indefinitely high by central bank and government distortion, 

2) The belief that tech stocks are changing the narrative – bubbles always thrive in times of invention and innovation that nurture hopes of extraordinary future profits. 

3) The surge of new participants into stocks – not just the retail “RobinHoods” but also professional and institutional investors being forced into more risk market niches. 

There is a great new book Boom & Bust; a global history of financial bubbles, which describes the Bubble Triangle: 

  • Marketability of the asset – Legality, markets, size of market, divisibility, 

  • Money and Credit – What fuels the bubble? Relative returns, FOMO, low rates

  • Speculation – The snake oil story, the belief in “momentum”, the absence of financial gravity, a “this time it’s different” mentality, and an increasingly unshakeable belief “prices are always going to go up”. 

The authors warn the most dangerous bubbles are those driven by policy. (Your internal alarm bells should be screaming at this point.) There has never been a period in the history of the capitalist west where policy has been this critical for driving up the price of the stock market.

The fact the soon-to-be-ex-US President didn’t understand that prices were being driven higher by policy – and assumed it was all due to his personal financial acumen – is revealing just how much in denial folk are about the current monetary distortions. 

And that's where we stand – at that river in Egypt – it's called denial

 

Provided courtesy of Phil's Stock World.

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