Ep. 488 – The Headline Economy

The Kapital News
The Kapital News
Ep. 488 - The Headline Economy

It’s all about the story, the narrative, the headline. Global equities are all about weaving a nice bed time story to pump stocks higher and here in the US – to all-time highs and record valuations. This historically does not bode well at all for future positive returns. In fact, it’s usually a harbinger of a significant decline – a reversion to the mean. As we have been witnessing, markets, once they sell-off, have been doing so to a greater degree and with greater rapidity. Recall Q4 of 2018 where the major indexes lost around 20 percent. Then fast forward to earlier this year, where we witnessed a near 40 percent drop within 6 weeks. What might this portend for the next leg down? Perhaps 50 percent within a few weeks – could you imagine the carnage?

Nonetheless, like a good little addict, the market has been conditioned to take any negative news in stride, “knowing” that their dealer(s), the Federal Reserve and the Congress will have their backs and throw as much monetary and fiscal support (dope), into the system as they can. And if the actual liquidity isn’t enough – don’t worry. This is because there are a number of headlines that can be circulated to juice the markets. Take for example the US-China trade talks that we heard about endlessly throughout 2019 and only to come to a “Phase 1” agreement that was no where near the hype. Then onto Covid-19 and the “need” for monetary and fiscal support – this coming to the tune of trillions of dollars that we did not and do not have. Then calls for further actions from our policymakers and this has been making the headlines for several months now, but with no deal yet agreed upon and signed. Why actually do something, if the headline is good enough to pump the markets? Then there’s the vaccine headlines – with several major pharmaceutical companies working on this assignment, this means that there can be headlines galore promising a vaccine soon to enter the market. Over the last two weeks and even today we hear of more information on the effectiveness of some of these vaccines. And while there are others, we’ll leave with the rush of IPOs – reminiscent of the late 1990s and the dot-com bust, a myriad of companies, mainly tech, are rushing the markets to raise capital. Of course very few, if any, are actually profitable – but profits matter not. This is because we’re in the midst of the headline economy – fundamentals don’t matter – just a good story. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Jobs #Markets #Liberty #Revolution #EndTheFed #BananaRepublic #USA

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