The New World is not here Yet
This morning there seems to be a general feeling of “we missed the bullet”, but have we really. Trump is subdued, his Proud Boys are humiliated, but reality is, this third of the population is not going away, they will make life difficult for Biden/Harris, and the thrust in a few months will all be about the 2022 election.
There is some good news, it appears that a deepening analysis of the 2020 elections shows that the people under 30 are a big reason for election victories of the Democrats, especially in the recent special elections. That is a reason for hope. The Trumpers would appear to be a mix of the 30 + losers and the greedy.
We now go into the Biden/Harris test, are they really going to make climate change, infrastructure, and health care different. They face a huge headwind with the group that has prevailed over the past 40 years, people who are more interested in making money on climate change, infrastructure, and health care, rather than fixing the problems. Wall Street has a lot of ideas being rolled out to let people get rich on these three areas.
Here is the chart we have shown many times since August 7th when the market value of production assets peaked. That August 7 level is being assaulted this week, not because there is more free investment money, the 80 Billion a month that the FED adds is being destroyed by a decline in productivity, in a sense a wash, but by a return to euphoria and hope. Since August 7th, bond prices are down 13 percent and gold 8 percent. At the same time stocks are up 12 percent. We are going nowhere.
The outlook letter should be completed over the weekend. I do think that the big surprise for the markets will be the forced move of money out of speculation towards real investment. This will be the result of Yellen not being who they expect, she is more about balance and equality than hot money. And capital gains and corporate tax policy will be the capstone, we have to subdue the deficits.