Capital Chaos


The Week of Chaos

I hoped things might settle down between the Senate race and today’s market broadcast (and time of this writing). Instead, the opposite happened.


We saw protesters storming into the Capitol, Twitter canceling and banning President Trump’s account for life, and Congress trying to get Vice President Pence to invoke the 25th amendment, which he did not do. And now they're looking at the impeachment proceedings once again. Who would have thought all this would happen in one week? Now it is just two weeks until the inauguration of our new president.


It is very interesting that there was an emotional reaction among our society, yet the market has hardly even made a whisper. Usually you would assume that there is a correlation with the market and the media. It just goes to show that the market will ultimately do what the market wants to do.


COVID-19

We continue to see COVID-19 cases reported at an elevated level. But if we were to look at an exponential factor, the curve is that of a quarter of a circle. We can see that the ramp up was an exponential growth line.


At some point the statistics will start to turn over. We hope to pass this over the next couple of weeks to start seeing that average number decline on either a 7 or 14-day average.

Mandates and lockdowns continue to be enforced. California is a current hotspot and is implementing travel restrictions.


Political Environment

President Trump stated that the community should march down Pennsylvania Avenue over a week ago. Nonetheless, there was an altercation with people that were not lawful. It certainly had an impact on people's feelings about President Trump.


The violence that happened last summer is interesting to compare to the recent violence. Civil disobedience is something that we historically have honored. For example, most Americans actually think the Boston Tea Party was great. It's part of our history, and we honor it because of how tyrannical the government was. I think that government was a light hand compared to any government that we have now.


Political Party Risks

It's just a matter of time before the Democrats are looked on as failing. Things are fundamentally changing inside the country that the politics haven't aligned to yet. So what is the chart below telling you?

In 2008 there was a center, a party within Italy that had gained power. The red is the Democratic party, very similar to the Democratic party in America. They had gained power in 2008 and 2009, then lost it in 2013 to 2014. This ultimately led to the Democratic Party taking power.


This is what happens whenever you lose politics in this environment, where things continue to deteriorate. Then, the five-star movement happened in Italy. So instead of it being a center/right country it moved to a further right political party, and in a sense regained power.


Centralized to Decentralized --> Tech World

The world is changing, and we're moving from a centralized system that is high, strong, and central to a painfully decentralized system.


This is globalism, where everything is one big market to populism. The populism movement is growing — and it's not just a United States phenomenon. We also see it in the Eastern European countries.


It's not surprising to see the world start to mimic the way that the system is organized. Just like there's been a centralization of authority into the federal system, you also see the same type of concentration of power and centralization into tech companies.


As a result, we have now the opposite movement happening. With the idea of the tech companies, we don't really own our information. Once we put stuff out there on the internet electronically, that information is grabbed by all these large players through big data systems. They manipulate that data for advertising. The movement now is, “How do I get my information back so that I control it?” That’s decentralization.


China Centralized?

What is the talk about China's new effort? They're having this electronic Bitcoin system where everything is done through your phone — again, back to decentralization. I am not the only one to think China is on the rise and that they're going to beat the United States.


That said, I think they have more problems and are centralizing the pain more than we're going through right now. I predict America will ultimately come out and be stronger than before. The United States will probably be more decentralized, and China will have more local control. Therefore, I think we'll end up with a more federal system than what we have right now.


Money Supply

The money supply is growing. We have had two very large stimulus packages this past year and there seems to be another one on the horizon next week. This is what's driving the market, and it's very high. We can see just the change in billions of dollars to the money supply added, while seeing 2020 was just very high in the amount of money. Speaking about the government stimulus, it seems as though companies that benefited the most were actually the large companies (even though it was really meant for the small companies).


Investment Themes

Where do we see our focus so far for this year? We continue to see inflation risk as being very high. We're starting to see that for the past 10 months, oil prices have been high. There's been a lot of borrowing, especially at the municipal level, since 2013. Therefore, there are indications or anecdotal evidence that we are starting to see that inflation theme begin to pop up food prices. Any additional stimulus is likely to continue to add to this risk of inflation.


---

For real-time updates, be sure to tune in on Tuesday – Thursday on our social media for our “Daily 3x3” livestreams and Wednesday for “Market Insights.” Follow us on social media so you never miss a broadcast!


Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

2 views0 comments

Recent Posts

See All