Convergence to the global hegemon

Another correct prediction: the S&P 500 closes above 4,000 for the first time ever, and as of writing this post it is up another 1.5%, at 4080-.

The S&P 500 closed above 4000 for the first time to kick off the second quarter, buoyed by a continuing rebound in technology stocks.

The broad stock gauge jumped 46.98 points, or 1.2%, to 4019.87, after closing out a fourth consecutive quarterly advance on Wednesday. It took just 434 trading days for the index to set its latest 1,000-point milestone, far fewer than the 1,227 trading it needed to climb to 3000 from 2000.

The Nasdaq Composite rose 233.23 points, or 1.8%, to 13480.11. The Dow Jones Industrial Average added 171.66 points, or 0.5%, to 33153.21.

I am still predicting 20-30% annual returns for the S&P 500 for the foreseeable future. The post-2008 era of low interest rates combined with record-high corporate profits, low inflation, and no recession may continue for half a century or longer uninterrupted, making the post-2009 economic expansion about 5x longer than the record set in the 90s. There is no reason to expect things to change anytime soon. All the trends that have been in place since 2009 are stronger than ever.

Gamestop keeps going up. Everything I said would happen, is.

We’re seeing the convergence to the global hegemon , as an increasingly large percentage of economic activity and wealth creation is concentrated through a shrinking number (relative to the size of the global population and global GDP) of firms, countries, and individuals. Something like 8 individuals control half of the world’s wealth. This trend will continue , converging to near 100%. By this decade, Bezos and Elon Musk will become trillionaires, growing their wealth at a rate that far exceeds inflation in spite of low GDP growth (why this is true is explained in the final paragraph). Same also for the disparity between US and China dollar-adjusted and real economic growth and asset appreciation relative to the rest of the world. Emerging markets, Europe, South America, Middle East, Russia, etc. will continue to lag as money pours into the strongest and safest of economies, those being China, the US, Japan, and a handful of others as everything else lags, and also Silicon Valley, Seattle, and New York continue to pull ahead compared to the rest of the US (New York City is not dead, sorry).

The US dollar will remain strong in spite of massive stimulus and other spending. Home prices in Vancouver , Seattle, Bay Area and other ‘smart’ regions will keep rising, as part of this hegemonic convergence. As I correctly predicted in 2015-2017 there was no housing bubble, as prices keep making new highs thanks in part due to Covid. The pandemic only helped widen the gap, which was already very wide to begin with, between the winners and losers of society and the US economy, in the process acerbating this convergence.

This winner-take-all convergence is also noted on social media. Elon’s Twitter account is probably more popular and important than all of other accounts combined the only exceptions being Biden, Obama ,and a few other celebrities and politicians. Big tech will keep getting bigger. The era of antitrust ended in 2000 after the DOJ failed to break up Microsoft–a legal slog that lasted years and wasted billions of dollars and thousands of man hours on what would prove to be futile endeavor, so that will not be tried again.

The college wage premium will keep widening, as will student loan debt keep growing. No bubble burst. Pundits who were hoping last year that Covid would prick the college bubble will keep being wrong. Same for rent prices, which will rebound soon in SF and other metro areas. Any dips will prove temporary. There is simply too much demand for housing and not enough supply, and the only possible outcomes is prices go up for both rent and real estate on a real basis, not supply.

In spite of record government spending, infrastructure will continue to decay. Potholes everywhere. There is too much poltical inertia for this to change.

Multinationals , especially in ‘big tech’ and ‘big retail’ such as Nike and Disney, are generating record profits, and that money is passed down to shareholders in the form of share price appreciation and or dividends. What a lot of people do not understand about the stock market is, is that profits dictate returns, not GDP growth, hence the seeming disconnect between the US economy, which feels anemic, and the stock market, which is always going up. Even if GDP is flat, as long as big tech companies can generate massive profits though reliable recurring revenue streams and have impenetrable moats and market dominance, that money must be passed on to shareholders regardless of what GDP does or how high the national debt is. This is what separates public companies from private ones (private companies have much more control of how profits are disbursed)