Massive Unemployment Leads to Massive Stock Market Gains

I’ve been doing this a long time. And the last two years have been beyond anything I could ever have conceived. The President spends most of his time promoting trade deals and lower interest rates.

CEO’s loaded up on debt and used 105% of cashflow to buyback shares at all time highs. Stocks achieved excessive valuations. The Fed cut interest rates with the stock market at All Time Highs.

I mentioned a few times never to bet against the President. My view was that he had enough savvy people around him that knew how to inflate (or manipulate) the stock market. That to do so would be dangerous.

And Yet, Most of the mistakes I’ve made in the past two years were because I avoided my own intuition.

All bets are off.

This week has been the theater of the absurd.

Massive job losses of 30M with hardly a downtick all week. The Nasdaq is now a whisper below ALL TIME HIGHS. Investors are giddy. Risk has been defeated.

Relevant Articles:

45 Ways to Increase your Income

9 Best Ways to Save $7K This Year

11 Legitimate Survey Sites for 2020

That which isn’t good for the hive, isn’t good for the bee.

Marcus Aurelias, Meditations

Negative Interest Rate Policy: The Fed is flirting with Negative Interest Rate policy, a radical failed experiment everywhere it has been tried.

Japan’s stock market is flat for the last 30 years. Their economy is irrelevant. Their government owns their economy via ETF purchases. Most international mutual funds and indexes do not even include Japan. It is irrelevant.

Apple is up 39.22% for the month. The company has no guidance. Couldn’t provide earnings visibility on the recent earnings call. They issued bonds this week to buy back more stock. Buybacks are the cotton candy for today’s investors.

Warren Buffett in 1962 and Benjamin Graham in 1947

Warren Buffett: Oddly enough, we began this week with warnings from two very influential investors.

Warren Buffett announced he had sold his entire airline stake on the premise that he wasn’t sure if air travel would return in two or three years.

That’s the most bearish assessment anyone has heard from Mr. Buffett in quite some time. But, few investors or Algorithmic programs paid much attention to him these days.

Zell: Sam Zell mentioned this week that he was quite cautious about the future.

“Too many people are anticipating a kind of V-like recovery,” said in an interview with Bloomberg Television.

“We’re all going to be permanently scarred by having lived through this.”

Just as the depression left behind a generation that couldn’t shake the experience of mass unemployment, hunger and desperation, the burdens this crisis has forced on society may be similarly hard to forget.

Zell, 78, said it won’t be easy for people to live as they did before the “extraordinary shock” of the pandemic.

And so today the market continues its march towards new highs. Investors are cheered on by administration talking heads promising a V like recovery. It is an election year, so what would you expect them to say?

The money printing is unlimited as are the stock gains.

Buffett had this to say about the Fed Actions:

“We’re doing things that we really don’t know the ultimate outcome to,” the 89-year-old investing legend said at the virtual meeting. “I think in general they’re the right thing, but I don’t think they’re without consequences, and I think they could be of extreme consequences if pushed far enough. But there would be kind of extreme consequences if we didn’t do it as well.”

What about the 30 Million unemployed? They stay on the government statistics for 6 months and then they are removed. When 12 Million find some sort of new employment (probably less well paying), the talking heads on CNBC and the government economists will gleefully tell you that the job market is “strong”.

It never ends.

Be careful friends.