Trump is cutting business taxes dramatically and all US multinationals will repatriate trillions on offshore dough. Win win win win (note the extra win).
But Chinasia is now >1/3rd world GDP and is >50% of the growth. Repatriation = dollar surge. Strong dollar = stronger purchasing power for US citizens (300 million) and less purchasing power for China citizens (>1 billion). Right as the Chinese are moving from manufacturing/industrial economy (weak currency = cheap input costs good for that) to a consumer driven economy (need strong currency to buy more things).
I’m struggling here, also. Cash held in off-shore accounts (tax evaders) just went up in value? Hence cash on the balance sheet worth more, hence stock price goes up? I’m reaching……
Psychological principal of herding into US denominated assets. I’m thinking foreign concentration of capital, which correlates with bubbles.
Foreign capital worried about the future of their currency (say euros) wants to rotate into US denominated assets including dollars and stocks. Apple for example has a lot of US cash on the books plus lots of dollar earnings.
Japan post Plaza accord saw rising yen and rising stocks from 1985-1989.
In the US 1995-2000 rising dollar, rising stocks. I believe 1926-1929 also had rising US stocks, rising dollar.
You can probably draw parallels to the years between bubbles as well as mostly some sort of normalization between the psychological herding.
1981-1985 followed the prior bubble (in precious metals) before capital flooded into Japan.
1989-1995 following Nikki bubble prior to capital flooding into Nasdaq.
2001-2004 following dot com bubble prior to concentration into banking and real estate… Due to leverage of those two, several other bubbles formed (commodities, metals, financials). Minor bubbles even continued during the deleveraging that followed (oil,gold). But ultimately leading up to 2014, markets were still more “normalized” than the prior herding just like other post bubble periods.
I think either Buffett or Munger once mentioned an investment mistake of a furniture business which seems to have a low P/E. The earnings seemed good but the oversight was that much of the earnings were a result of the excess credit during the credit expansion leading to excess and unsustainable earnings.
In a similar way foreign capital and credit will probably inflate earnings, wages & credit available for spending… which in turn inflates earnings and expands the bubble through artificial earnings “growth” which also may happen at the same time we see multiple expansion. As capital leaves Europe or wherever there’s less free capital available for investment and more psychological pain for holding foreign stocks, so the chase/concentration of capital continues. At that point, people will see “value” where there isn’t any and rely on growth that isn’t sustainable just before the dumb money comes in and the blow off top.
the circus has a habit of a three day loony binge followed by massive hangover.
Ex-Multinationals EPS will become the new Ex-Energy EPS.
Maybe lack of WWIII combined with bolstered USD reserve status is causing twilight zone bullishness everywhere?
Trump is cutting business taxes dramatically and all US multinationals will repatriate trillions on offshore dough. Win win win win (note the extra win).
But Chinasia is now >1/3rd world GDP and is >50% of the growth. Repatriation = dollar surge. Strong dollar = stronger purchasing power for US citizens (300 million) and less purchasing power for China citizens (>1 billion). Right as the Chinese are moving from manufacturing/industrial economy (weak currency = cheap input costs good for that) to a consumer driven economy (need strong currency to buy more things).
This will not end well.
I’m struggling here, also. Cash held in off-shore accounts (tax evaders) just went up in value? Hence cash on the balance sheet worth more, hence stock price goes up? I’m reaching……
Psychological principal of herding into US denominated assets. I’m thinking foreign concentration of capital, which correlates with bubbles.
Foreign capital worried about the future of their currency (say euros) wants to rotate into US denominated assets including dollars and stocks. Apple for example has a lot of US cash on the books plus lots of dollar earnings.
Japan post Plaza accord saw rising yen and rising stocks from 1985-1989.
In the US 1995-2000 rising dollar, rising stocks. I believe 1926-1929 also had rising US stocks, rising dollar.
You can probably draw parallels to the years between bubbles as well as mostly some sort of normalization between the psychological herding.
1981-1985 followed the prior bubble (in precious metals) before capital flooded into Japan.
1989-1995 following Nikki bubble prior to capital flooding into Nasdaq.
2001-2004 following dot com bubble prior to concentration into banking and real estate… Due to leverage of those two, several other bubbles formed (commodities, metals, financials). Minor bubbles even continued during the deleveraging that followed (oil,gold). But ultimately leading up to 2014, markets were still more “normalized” than the prior herding just like other post bubble periods.
I think either Buffett or Munger once mentioned an investment mistake of a furniture business which seems to have a low P/E. The earnings seemed good but the oversight was that much of the earnings were a result of the excess credit during the credit expansion leading to excess and unsustainable earnings.
In a similar way foreign capital and credit will probably inflate earnings, wages & credit available for spending… which in turn inflates earnings and expands the bubble through artificial earnings “growth” which also may happen at the same time we see multiple expansion. As capital leaves Europe or wherever there’s less free capital available for investment and more psychological pain for holding foreign stocks, so the chase/concentration of capital continues. At that point, people will see “value” where there isn’t any and rely on growth that isn’t sustainable just before the dumb money comes in and the blow off top.