The three major stories of the second-half of 2020 are:
BLM protesters and the apparent inability/unwillingness of anyone in charge to do anything to stop the unrest. Every few weeks or so, there is new rioting and looting. This has become the ‘new normal’ in post-covid America, in which there is so much capital due to low interest rates, insurance, and bailouts, that such behavior is tolerated and is treated as a financial loss than a social dereliction. Because all the affected parties are cashing out on insurance claims, there is no financial incentive to do anything. If if everyone is getting paid and keeping their jobs, why do anything?
The 2020 US presidential election. Some on the left are complaining that Biden is not campaigning, but why should he? it is not like there is anyone who does not know who is his: he is in the news constantly, having months ago easily secured the font-runner position after Bloomberg and Sanders dropped out. Half the country is voting for Biden because he is not Trump, and the other half voting for Trump because he is not Biden. There isn’t any need for campaigning when you already secured all the votes you are ever going to get, save for a handful of undecideds. Biden knows that the more he speaks, the greater the likelihood of inadvertently revealing the extent of his cognitive decline, which may become even more apparent during debates. That is not not say Trump is a stranger to gaffes, but a selling point of the democratic party that they are supposed to be the smart, sober alternative to the reckless, uninhibited Trump, but having your candidate be unable to read from a script without garbling his words, does not lend much confidence.
Covid isn’t going away in the US, as I correctly predicted months ago. I predicted that curve flattening and masks would not work in the US (in spite of such measures apparently working in other countries), and that the number deaths would hold steady at around 1-2k/day for many months, which is what has happened. The number of new daily cases started surging in June to record highs, so all of that social distancing and mask wearing was probably for naught. ‘Flatten the curve’ was a huge failure, like I and others said it would be.
In the post Coming to terms with death in May 1st, I wrote:
You look at the daily chart of US deaths and cases, in spite of these drastic measures being taken, there has been no appreciable decline in daily deaths or cases. I have never been one to try to sugarcoat this. We’re gonna see a lot more deaths…at rate of 2k deaths/day for another 100 days gives a possible total of 200k-400k deaths by the time this is over. So that is pretty bad, way worse than a typical flu season.
At 170,000 deaths in the US so far, my 200,000 target will likely be reached before the end of the year. A reason I was (and still am) so optimistic about the US economy and stock market in spite of this worsening virus outlook, is that economic impact of all these people dying, although perhaps tragic at an individual or community level, is relatively small on a macro-scale. As discussed in the post The great write-off, the the US is a huge country, and a 1% annual population growth rate (~3 million people) means all the total Covid deaths will be replenished in only a month, just by virtue of population growth.
The S&P 500 made a new high this week, having recovered all its Covid losses, as I also correctly predicted it would. There are two ways of looking at this: that market is overvalued and a bubble and that market participants are unaware of the risks, or, more cynically, that the people who lost their jobs and businesses were dead weight to the economy and of little value even before Covid. My hypothesis has been the latter. Covid has streamlined and accelerated the US economy to a more efficient state, by concentrating economic activity in a handful of hugely profitable, efficient large firms such as Amazon, Netflix, Apple, Microsoft, Facebook, McDonald’s, and Walmart. Much of job loss due to Covid only affected low-income people, so consumer spending was not hurt that much (especially not Tesla sales, as shown by the surge in Tesla stock), and I also correctly predicted the wealth of Bill Gates, Mark Zuckerberg, Elon Musk, Jeff Bezos, and other tech billionaires would keep going up. From the post:
From the post Investment and economic perspectives post-Covid, part 2
It’s vindication of a hybridized economic system that combines quasi-socialist policies of bailouts and stimulus, with private property, ownership, and capitalism. Jeff Bezos and Gates are wealthier than ever and will keep getting wealthier and wealthier. It shows that these can be mutually inclusive, as opposed to being incompatible, which is how the capitalism vs. socialism debate is usually framed.
Amazon and Tesla stock (which I have recommended on the blog for years) have surged from their pre-Covid peaks. Amazon was at $2,000/share before Covid, now at $3,300; Tesla peaked at $960/share before Covid, now at $1,600. Amazon, Apple, Netflix…all these stocks made new highs. I predict Amazon will be worth $10 trillion within a few years, and Facebook, Google, and Microsoft, and Tesla in the $1-2 trillion range. These numbers may seem absurdly high, but six years ago no one could have conceived Amazon being worth $1,5 trillion (except myself and maybe one or two other people) and yet here we are. The liberal media calls it a bubble, but they ignore that earning growth is also surging along with the stock price. The liberal media is always wrong, whether it is tech stocks being a bubble, or the narrative that George Floyd was an innocent victim (the recent bodycam footage, conveniently withheld until only after all the rioting and looting took place, not only shows the officers trying to calm and restrain him, with much futility until finally kneeling as a last measure after everything else had failed, but that Floyd was obviously on drugs). Amazon makes so much money that if the stock price fell to where it was in 2014 when the media was calling it a bubble, it would actually be undervalued by conventional metrics.
We’re living in Bezos’, Cook’s, and Gates’ world as far as the economy is concerned. But neither side can get what they want in terms of the culture wars and politics. Bill Gates , in spite of his great wealth and influence, still faces significant resistance about his vaccine agenda. Trump supporters can never get the ‘law and order’ (in regard to protests) they seek. Biden supporters cannot get Biden to campaign or talk about issues important to progressives (such as a healthcare). Rather than talking to each other, we’re yelling at each other (such as on the streets or online) or past each other. Young people, board and with an abundance of free time due to Covid, have taken to activism. ‘Cancel culture’ is just the latest expression of the self-anointed ‘oppressed class’ against their imagined oppressors.