The fluctuations in the stock indices, during trading after the announcement of the continued decline in inflation, clearly indicates the problems that are piling up before investors: 1. Total uncertainty 2. Trust that is deteriorating in the economic leadership, especially in the central bank and 3. An even greater lack of trust in the financial media.
It is no wonder that investors, especially young ones, are looking for solutions on the networks, which causes more confusion. But despite the shocks, it is becoming more and more clear that the “wisdom of the crowd” is right, “Presidents and wind and torrential rain”, the crowd shouts during the last month regarding the continuation of the policy of interest rate hikes, “there will be more and more” answers the chorus of experts in the media with the support of the governors of the central bank. Factually, so far, the crowd is right, inflation is on the decline and the continued interest rate hikes, along with the weakness in the regional banks, fuel the prospect of a recession. Right now, based on the known facts, I don’t think a recession is coming.
It seems to me that the central bank and many experts refuse to acknowledge the fact that a significant part of the threats to the economy, such as the corona virus and the Russian invasion of Ukraine which created serious economic problems, have weakened. Inflation factors (supply chain issues, wheat prices, etc.) are easing, oil prices have shown clear signs of decline since June 2022.
Investors are confused because they see that employment is not affected, that personal income continues to rise, that consumption does not decrease and so does economic growth and that the technology revolution continues to disrupt huge industries and to streamline and even the conductor industry is “no longer in danger” (as if it ever was) and is recommended for collection. Finally, investors also understand that the US has already entered the 2024 election war, which will make it very difficult for the central bank to continue its current monetary policy. Why then does the central bank insist that inflation, at the moment, is still more threatening than the recession? Because the governors of the Fed and the governor himself are human, like you Like me and according to the latest protocol published this week, already last month, there started a debate about the policy and we think that what the veteran trader, the popular commentator on CNBC, Kenny Polcari, told Reuters yesterday, “I didn’t see anything new that was so significant in the Fed committee report, They’re going to raise (the director) another 25 points and then they’re going to stop.” Why do we need another 25 points? Because some stick to the original plan and some are probably self-interested, people like me and you as mentioned but, in my opinion, the “crowd” is right!!
All this does not mean that you should rush into stocks, but that, in my opinion, and for some time now, it is a stage that allows you to choose, after a personal examination and reaching conclusions, suitable investments. The shocks will continue and the speed is from the devil as we know. In the meantime we will try to look at the current socio-economic situation in the USA because that is what will determine who is right.
This week we went to see the basketball game held at the magnificent Barclays Center between the Brooklyn Nets and the Philadelphia 76ers and this after the previous evening we witnessed the amazing Broadway show “Some Like It Hot” which was staged at the end of last year, an amazing show at the performance level and based on the movie of the same name, starring J. K Lemon, Tony Curtis and Marilyn Monroe, which was introduced in the 1950s and won every possible award.
After all this goodness we spent an evening with our old friend Steven who came to meet us accompanied by his son who manages a “small” hedge fund, about four billion dollars, which focuses on trading through smart platforms. “My genius child,” Steven explained, “thinks that long-term investing is for two hours, and the investment houses have probably come to the conclusion that in these days of total uncertainty, it’s worth trying any innovative channel in order to increase profits, even if the context of the move is not exactly coordinated with the economy, me and you We grew up on it and in the meantime it’s working for him,” said Steven with the smile of a father who is proud of his son, “the algorithm got him out of all crypto in time and now the brain is directing him in the direction of the security industries, quite logical I would say.” We are telling you these things because through them it is possible to learn about the socio-economic situation of the USA.
This is important because the USA, for all its flaws, which are just as impressive as its advantages, is still the engine that turns the world, certainly in the economic field, Still a power that with all due respect to China is the only one of its kind in the world and still, what is important to every person who still believes in democracy, the most real democracy, for better or for worse, in the world.
The USA of 2023, which the atmosphere of the presidential elections of November 2024 is already enveloping it from every direction, is, from the socio-economic point of view, in a situation that growing parts of the American public have not experienced in their days, greater uncertainty than they have experienced in the past. Part of the uncertainty is related to the changes that the economic media is going through, in which the gap between facts and estimates (even fakes) is blurring as a result of the rating wars against social networks. The baby boomers generation (born 1964-1946), who still lead the government and the economy is out of the picture, are passing the baton to generations X (born 1965-80), Y (born 1981-96) and even to the “children” of the generation -Z (born 1997-2010) the impatient ones who, in their opinion and due to their mastery of the changing communication technologies, “the world belongs to the young…”.
It is enough to see the crowd that comes to the Barclays Center or the Shubert Theater, most of which as a whole do not resemble the crowd we saw in such places at the end of the last century (at the Barclays Center we saw many more ultra-Orthodox Brooklynites, boys and girls, African-Americans and Latinos than the crowds that filled halls in the past). It is enough to walk around for a while in the “navel of the world”, Manhattan’s Time Square, see the advertisements, listen to the music and even check out the many restaurants to agree that we, Baby Boomers, are no longer in the game at all. As Steven’s son said without paying attention to who he was sitting with, “The Baby Boomers on Wall Street have been dead for a long time, they just don’t know it” and you understand that “the boy” didn’t mean to offend, he just stated facts.
The changes do not miss Wall Street. The baby boomers who dominated the economy are leaving and the younger generation is moving into the driver’s seat, Buffett out and Musk in. GE, Alcoa Aluminum (AA), IBM and the like that led the indices of the last century have been replaced by technological disruptors such as TSLA, AMZN, NVDA, GOOG when more and more platforms are managed by artificial intelligence.
Yahoo checked the historical connection between the publication of quarterly reports and the trend that will develop during the quarter. Which companies have the most influence on the development of a trend? In 1980 it was AA, DD, GE and their ilk that set trends. Today it is about “companies by which consumption is measured”, companies like FDX and UPS whose number of packages they move is an indication of consumption, companies like AAPL and GOOG on the one hand, WMT and AMZN on the other. And of course there are companies like Tesla, ISRG, NVDA and other “companies that successfully produce a disruptive consumer product” as Hyman rightly calls it.
The USA, which in the 1980s employed 19.6 million workers in industry out of a population that then numbered 226 million, currently employs only 13 million workers in industry with a population of 332 million (this is “a little” misleading because the USA is still the world’s second largest exporter of industrial products after China where the bulk of Chinese exports depend on the US and the US is the world’s leading agricultural exporter).
What we are trying to explain is that due to the tremendous technological changes that disrupted economic axioms of the 20th century, demographic and social changes were added, especially in the last decade, and these, “with the help” of a number of black swans, added to the mess and uncertainty that the investor must navigate through. It’s no wonder the market is shaking as it is and uncertainty is rising.
But with all the amazing changes the US has undergone, in every field, the basic approach to investments has not changed, The American still prefers investing in stocks as he clings to his belief that the US economy will continue its historical growth path which is on an almost constant rise. Growth that the various technological revolutions, since the end of the 19th century, alongside the “American dream”, “take care” of this. The growth in GDP per capita in the US “B has increased every year since 1947 (the recovery from World War II) except in 2009 (the 2008-9 crisis) and 2020 (the corona virus). Moreover, per capita income in the US has grown continuously (again excluding 2009 and 2020) since 1947 with the 2 indicators increasing the pace since the merger between the technology revolution and the mainstream economy began in 2009-10. Also the trend in the rate of real economic growth of the US GDP in similar The forecast for continued growth until 2025 indicates a return to the historical path of increases, in this the majority of US investors and millions of other global investors believe that technology has enabled their entry into the “game”. , guarantees the continuation of economic growth and this is clearly seen in the behavior of the capital market in the face of the experts’ warnings.
Examples: three huge industries, medicine (12 trillion in 2022 and predicted to 19 in 2029) and automobiles (3.6 trillion in 2022 to 6.07 in 2030), together about 14% of the global economy and the civil space industry that is just beginning are at this moment In the midst of a total disruption/establishment process that will take years and will help, along with the other sectors that are going through a similar process, for continued growth. Medicine is moving to prevention, the automobile industry to electric vehicles and then to autonomous vehicles, which will also take years, while the space industry, an innovative field in the technological revolution, is estimated to contribute approximately 1.1 trillion dollars to the US economy by the end of the decade. It is recommended to review the Bank of America’s research.
The world’s leading brand valuation consultancy, Brand Finance, announced this week that Tesla’s brand value rose 44% year over year to $66.2 billion, five times the pre-pandemic level. The report notes that this is the first time a brand that does not produce internal combustion engines tops the global ranking. Tesla is ahead of Mercedes-Benz Group with a brand value of $58.8 billion and Toyota Corp with $52.5 billion.
Brand CEO Bertrand Chovet said: “This is an extraordinary achievement and is a testament to the value of the Tesla brand.” We claim that the achievement testifies to the revolution’s contribution to continued growth and the “wisdom of the crowd” that is right. The entire global electric car industry has arrived, in 2022 , only 5.8% of the automobile industry is powered by an internal combustion engine, but there is no doubt that the entire industry will move in the direction of electricity and the autonomous vehicle that has not yet reached the consumer.
The disruption of the healthcare industry is much greater than that of the automotive industry. Pfizer (NYSE:PFE) as an example, after developing a prevention for Corona this week received excellent results for the vaccine it developed, the RSVpreF against respiratory diseases of babies, which will make the Pfizer shot the first maternal vaccine available to prevent the disease in babies. This process of disruption, which as mentioned passes through every economic sector and fueled increased economic growth since 2009-10, is only at its beginning and will continue to fuel for years. The wisdom of the crowd is right!