The equity era, Sharpfokus61
The equity era
You’d probably agree that we’ve had amazing decades for equity markets. Apple market cap has reached more than a trillion dollars, helping the Nasdaq to reach almost 8,000! Amazon has become the fastest growing stock in history. The JCI index hit 6,000 from its 1980s start at just 100. The Dow 26,000! Amazing right?
How equity did
US
Yes it’s true, Dow at 26k & Nasdaq at 8,000 are high levels, but it’s only happened very recently. For most of the last 2 decades the S&P was stuck at its 2000 highs & the Nasdaq was way below its. The huge gains have happened mostly in just the last 18 months, helping the US markets keep their 100% record of gains over 20 years.
Asia
That is not the case in Asia. Famously the Nikkel reached its peak in 1990 & remains below that level even after 38 years! Our JCI may be up in rupiah but in $s we are almost the same as we were in 1990. SE Asian ‘Tigers’ have had a terrible 20 years, China hasn’t gone anywhere since 2000 either.
Europe
European markets are also facing a lost 2 decades. While there are some gains in $s, in local currency most markets are below 2000 levels, the FTSE stuck close to 7,000. Since 2008 many markets are terrible. Newspapers used to full of stock tips, ow there are almost none. No leader talks about the equity markets only Trump can.
Why?
Growth
If this has in reality been a terrible time for equities, what is the reason, why? Equities love growth. The problem is growth has been so weak. When Margaret Thatcher left office, UK nominal GDP growth was double digit now it’s 1%. Japan hasn’t grown in forever. Indonesia had $ growth after 2000 but its negative again.
Government
You can look at many reasons for the slow growth. Mine is simply socialism. We thought we defeated it externally after the Berlin Wall fell, but the danger was from within not out. Europe, Japan are famously socialist, India & Indonesia too, China communist. The U.K. got dragged into Europe & only the US survived (but it was a close call).
Bonds
You only have to look at government bond yields to see. This was not the era of equity, it has been the age of bonds. UK yields collapsed when ‘New’ Labour came to power & got down to 0.5%! Japan went negative. The US fell towards 1%. Because of our FX policy Indonesia is a mirror image. But now, suddenly yields are rising. Growth is back.
You’d probably agree that we’ve had amazing decades for equity markets. Apple market cap has reached more than a trillion dollars, helping the Nasdaq to reach almost 8,000! Amazon has become the fastest growing stock in history. The JCI index hit 6,000 from its 1980s start at just 100. The Dow 26,000! Amazing right?
How equity did
US
Yes it’s true, Dow at 26k & Nasdaq at 8,000 are high levels, but it’s only happened very recently. For most of the last 2 decades the S&P was stuck at its 2000 highs & the Nasdaq was way below its. The huge gains have happened mostly in just the last 18 months, helping the US markets keep their 100% record of gains over 20 years.
Asia
That is not the case in Asia. Famously the Nikkel reached its peak in 1990 & remains below that level even after 38 years! Our JCI may be up in rupiah but in $s we are almost the same as we were in 1990. SE Asian ‘Tigers’ have had a terrible 20 years, China hasn’t gone anywhere since 2000 either.
Europe
European markets are also facing a lost 2 decades. While there are some gains in $s, in local currency most markets are below 2000 levels, the FTSE stuck close to 7,000. Since 2008 many markets are terrible. Newspapers used to full of stock tips, ow there are almost none. No leader talks about the equity markets only Trump can.
Why?
Growth
If this has in reality been a terrible time for equities, what is the reason, why? Equities love growth. The problem is growth has been so weak. When Margaret Thatcher left office, UK nominal GDP growth was double digit now it’s 1%. Japan hasn’t grown in forever. Indonesia had $ growth after 2000 but its negative again.
Government
You can look at many reasons for the slow growth. Mine is simply socialism. We thought we defeated it externally after the Berlin Wall fell, but the danger was from within not out. Europe, Japan are famously socialist, India & Indonesia too, China communist. The U.K. got dragged into Europe & only the US survived (but it was a close call).
Bonds
You only have to look at government bond yields to see. This was not the era of equity, it has been the age of bonds. UK yields collapsed when ‘New’ Labour came to power & got down to 0.5%! Japan went negative. The US fell towards 1%. Because of our FX policy Indonesia is a mirror image. But now, suddenly yields are rising. Growth is back.
Growth is back
Maxed out tax
I believe, & hope you will too, the era of slow growth is over. The reason? Socialist government is over. First, because of tax. Government can’t get any more tax without growth first. In the U.K the share of tax paid by the top 1% has tripled. In the US 10% pay more than 70% of all tax. In Indonesia 10% pay all the tax! There’s no more tax.
Interest rates rising
The only way for government revenue to now increase is cut tax & regulations first to get more tax later. & they are about to be hit on a second front too, interest costs. Incredibly low yields have reduced pressure on finances. But when low yields go up, the impact is huge. If Japan 0.1% goes back to 1% that’s 10X interest payments when you rollover.
Oil price rising
Heaping pressure on a third front will be oil & higher prices. Oil is surging back towards $100, Brent already $86! US is best off & self sufficient, Europe prices $10 higher, Indonesia... But higher oil prices are a boom for growth here as subsidies get cut & investment floods in. Indonesia always grows fastest with higher oil prices,
Maxed out tax
I believe, & hope you will too, the era of slow growth is over. The reason? Socialist government is over. First, because of tax. Government can’t get any more tax without growth first. In the U.K the share of tax paid by the top 1% has tripled. In the US 10% pay more than 70% of all tax. In Indonesia 10% pay all the tax! There’s no more tax.
Interest rates rising
The only way for government revenue to now increase is cut tax & regulations first to get more tax later. & they are about to be hit on a second front too, interest costs. Incredibly low yields have reduced pressure on finances. But when low yields go up, the impact is huge. If Japan 0.1% goes back to 1% that’s 10X interest payments when you rollover.
Oil price rising
Heaping pressure on a third front will be oil & higher prices. Oil is surging back towards $100, Brent already $86! US is best off & self sufficient, Europe prices $10 higher, Indonesia... But higher oil prices are a boom for growth here as subsidies get cut & investment floods in. Indonesia always grows fastest with higher oil prices,
Switch to equity
This is no longer a question of policy or leadership. Yes, places which move with purpose will do best, the US is streets ahead already. But the effect is unavoidable on others with less clear leadership. As pressure mounts & government shrinks, the private sector can leap for joy & it’s equity head into a new era of greatness.
Sebastian
This is no longer a question of policy or leadership. Yes, places which move with purpose will do best, the US is streets ahead already. But the effect is unavoidable on others with less clear leadership. As pressure mounts & government shrinks, the private sector can leap for joy & it’s equity head into a new era of greatness.
Sebastian