01
Jim Rogers (Jim Rogers), Jew, billionaire. Modern Wall Street is a storm, one of the most successful legendary investment masters in the American securities industry.
Rogers has warned more than once on multiple occasions that the US economy may face a more serious crisis than the 2008 financial tsunami, which will be the most difficult crisis it has experienced in his life.
Recently, he once again spoke in a dialogue column, expressing his deep concerns and helplessness.
(Jim Rogers, Source: Internet)
The host asked, you come from an era where value investment is very important, but what we are seeing now is that expensive stocks (such as technology stocks ) are getting more expensive as they rise, and cheap stocks (such as steel stocks) are getting cheaper as they fall. What is the reason?
Rogers came to the nail on the head, and this phenomenon will always happen at the end of the bull market. At the end of a bull market, people will turn to investing in assets they think are "safe", and then you will see these assets shine, and that's what's happening now. Technology stocks such as Apple , Google , etc. seem to never fall. For me, this is also a sign that a bull market is getting older (nearly close to the end).
Rogers said the next ten years will be the worst decade for investors in U.S. stocks. Due to too much debt, we will have a very, very bad bear market next.
He also plans to buy more gold and silver when the prices of gold and silver fall.
78-year-old Rogers has experienced the Asian financial crisis, the bursting of the Internet bubble, and the 2008 subprime mortgage crisis. I haven’t seen any storms before. Why is he so pessimistic - the next bear market will be the worst in my life?
Is this alarmist or a keen insight before the crisis?
02
This Friday, the three major U.S. stock indexes rose again, with S&P 500 setting a record for closing history, and rose nearly 10% in the past 10 trading days. In addition, the Dow Jones Industrial Average and Nasdaq also set intraday highs in the previous few days, rising 8.4% and 11.2% respectively in 10 trading days.
(Three major index trend charts of US stocks, source: Wind)
US stocks have been in a high market sentiment recently, which is related to two major events. First, the US election has fallen into Biden , uncertainty factors have been eliminated, the market believes that the US's anti-globalization process will press the pause button, the Democratic Party will return to WTO rules, and it is expected that global trade frictions will be reduced, and the US's wrong tariff policy will be appropriately revised.
Secondly, the important news of the development of Pfizer vaccine stimulates the excitement of global investors. In addition, the Democratic Party respects the scale of medicine and science in controlling the epidemic relatively.
But behind the crazy US stock market, we have to face a severe reality - the valuation bubble is getting higher and the risk exposure is getting bigger and bigger.
Judging from the historical valuation of the US stock market, the S&P 500's price-to-earnings ratio of more than 20 times is often the end of a large-scale bull market. , which has a price-to-earnings ratio of more than 30 times, is often brewing a larger bubble and may lead to a crisis in .
The first time was the technology bubble after 2000;
The second time was the subprime mortgage crisis in 2008;
The third time was the current situation where the new crown epidemic was becoming increasingly rampant - 35 times.
(S&P 500 price-to-earnings ratio trend chart, source: Wind)
Look at the Nasdaq again, the price-to-earnings ratio has reached 69 times and the price-to-book ratio is as high as 6 times, and the bubble is much more serious than during the Internet bubble period.
The fierce and crazy bull market from March to the present is not a spectacle of economic prosperity, but a complete currency liquidity market. The Federal Reserve has basically exhausted the toolbox behind it, lowered the federal interest rate to 0, and its balance sheet has expanded by more than $3 trillion in just a few months. Liquidity is flooded and it continues to pour into the financial market led by technology stocks that "never fall".
03
High US stocks, will it really be an ominous sign at the end of the bull market as Rogers said? We might as well take a look at the two major stock market pricing dimensions: economic fundamentals and liquidity.
1. The basic economic situation still depends on the face of the epidemic
On October 29, the U.S. Department of Commerce disclosed data that the U.S. economy grew by 33.1% on a month-on-month basis in the third quarter, which is in sharp contrast to the 31.4% drop in the second quarter's actual GDP annualized rate. With a sharp decline and a sharp rise, the US economy seems to be recovering strongly. It is just a misleading basis for the extreme situation in the second quarter and to some extent serving the election.
If the US economy wants to usher in a strong recovery, the most critical and necessary advance is to control the epidemic . However, things went against my expectations, and the epidemic in the United States became increasingly serious. As of the latest data, the cumulative number of confirmed COVID-19 in the United States has exceeded 11.22 million, and the number of deaths has exceeded 250,000. On November 13, 160,000 new cases have been added, and the number of new cases has remained above 100,000 for 12 consecutive days.
The current Trump administration has done nothing to the willful spread of the new crown epidemic, and Biden just advised the American people to wear masks and formed a team to say that they would block the new crown epidemic. The two parties are constantly fighting wildly, and the expectation of controlling the new crown is ultimately on the vaccine.
On November 9, Pfizer and BiNTech announced that the new crown vaccine they jointly developed has made significant progress in the Phase 3 clinical trials, showing that its effectiveness is more than 90%. On that day, European and American stock markets rose as a result...
However, their so-called "90% efficiency" was judged based on the data of "94 subjects infected with the new crown", which is only the conclusion of the first interim analysis; the vaccine requires ultra-low temperature storage and transportation of minus 80 degrees Celsius, and there are not many countries that can have large-scale transportation at this temperature; this vaccine was only observed for 2 months, and the report only talked about the effect, no side effects, and no mention of whether it will fail within a certain period of time, and there is no knowledge of long-term and safety. What's more strange is that on the day of the big positive news of the vaccine, the top leaders of Pfizer ( CEO and executive vice president) formed a group to sell 176,000 shares at the highest intraday price of US$41.94, worth nearly US$7.4 million. looks like this is not like saving people, but more like selling stocks and cutting leeks .
(Source: SEC)
vaccine is mass-produced and vaccinated on a large scale at the end of the year? Really, don't be too optimistic. The epidemic continues to rampage, and the US economy has a certain possibility to plummet and bottom down again.
2, monetary and fiscal policy
Starting this September, the Federal Reserve became vague about marginal easing and there was no further radical easing. In a later hearing, Powell hinted that the Federal Reserve had "do his best" to deal with the economic needs and political policies, and once again conveyed to the market that monetary policy will not be marginal easing for the time being.
has been silent for many days. Powell said on November 12 that given the potential challenges of the economy, the Federal Reserve "may need to take more measures" to strengthen the recovery. He also said that the U.S. Congress may "need to take more action", but quickly added that the "specific details" depend on members of Congress. .
Powell refers to Congress taking action, which means the trillions of dollars in fiscal stimulus aid programs that are stalemate between the two parties. Around December, the early fiscal aid funds will face the dilemma of food outage. You should know that personal consumption expenditure, which accounts for 70% of the total US economy in the third quarter, increased by 40.7%, becoming the main driving force for economic growth in the quarter and reflecting the effect of the federal stimulus plan.
QE became the only choice of the Federal Reserve. However, this time it is different. The Federal Reserve has not many tools for the ammunition box. Former New York Federal Reserve Governor Bill Dudley even bluntly stated that the Fed is very close to the situation of "exhausting ammunition and food". It is even more difficult to continue to marginally expand liquidity. More hope is on fiscal policy, but the trillion-dollar plan will directly have a serious pumping effect on the market (USD).
Once the trillion-dollar fiscal policy is implemented, the United States will issue a large number of US bonds to the market in the short term, which will lead to liquidity exhaustion and form a short-term siphon effect. Overnight interest rates will soar, and the US dollar index will rise briefly. However, with the additional issuance of US debt, the US dollar continued to flood, flowing to the world again and continued to depreciate significantly.
(Trend of the US dollar index, source: Wind)
US dollar liquidity exhaustion will hit the financial market hard, and such a script has been performed in March. Faced with various difficulties, the Federal Reserve is not omnipotent, and just letting go of water will only create greater risk exposure. The financial market does not focus on economic fundamentals, which will bring new disasters to the US economy and financial markets in the later period.
, the high-ranking U.S. stocks are basically supported by liquidity. Once the marginal expansion of the water level cannot continue (constrained by the US dollar index, inflation, etc.), the probability of the US stock market collapse at a high level and a second bottoming out is not small at all. The higher the U.S. stock investors are, the more crazy it is, the more crazy it is for . On Friday, among the top 10 U.S. stocks, Chinese companies accounted for 5, while NIO, which ranked first, had a turnover of as high as US$27.4 billion, with a turnover rate of 54.2%, exceeding the sum of Apple , Amazon and Microsoft .
Back to the conversation at the beginning, Rogers said bluntly, "People usually ignore one thing, that is, they think that technology stocks such as Apple , Amazon will never fall, but you and I know that just read the market history you will know that when the bear market comes, they will fall. Young people have been writing to me to ask us to buy more tech stocks, but I want to say, it will fall! Some people say that the bear market will not come again. No, the bear market will come!"
This may be a time bomb, which will hurt many people by then.
