Presidential Baselines – Biden Version 2021

I first produced the chart below on President Trump’s inauguration as a snapshot in time. It’s a good tool to help us quickly see the big picture and progression over time of some key economic metrics. So, I now prepare it on the occasion of President Biden’s inauguration.

One thing is clear, although the rhetoric between Presidents may be very different, no President seems to have the ability to reign Congress in on their spending. I wouldn’t be so concerned about the chronic deficit spending if we were at least reducing the debt relative to GDP, but that simply has not been the case throughout most of the 20th and 21st centuries. In fact, it seems we’re spending more and getting less for each dollar spent…a dangerous path. If we’re intent on spending all this money anyway, infrastructure spending would be far better for the economy long-term as opposed to bailouts and stimulus checks. At least that spending makes us more productive as a nation and could at least partially pay for itself over time.

presidential baseline

 

Continue reading “Presidential Baselines – Biden Version 2021”

BRIEF: Year End Market Returns Summary

What a year.

The widely followed S&P 500 index ended 2020 over 16% higher (18.4% total return w/ dividends) than it began the year even as it experienced one of the sharpest 34% declines in history (mid-February to mid-March).

The U.S. stock market managed a great year even in the midst of a global pandemic that saw businesses shut down, tens of millions of people lose their jobs, spike in corporate defaults, a steep recession (we’re still in BTW) and S&P 500 earnings that declined 13.6% from the prior year.

This means the entire increase in the S&P 500 was from expansion of the Price/Earnings multiple to over 30x, which is a level ONLY seen throughout history in the Dot-Com Bubble and Great Financial Crisis. The long-term average is about 16x. Continue reading “BRIEF: Year End Market Returns Summary”

Tesla: Some Perspective

I’ve been asked about Tesla several times the last few weeks so time for an update. This is a wonderful discussion that provides some perspective on the economics of automakers in general and the highly improbable events that would have to materialize to justify a valuation for Tesla at even 1/10th its current value.

In Mid-November it was announced that Tesla would be added to the S&P 500. Tesla stock is up over 70% since the announcement…not because of any fundamental change in the company, mind you, but simply because of speculators front-running index funds’ required purchases at any price.

The gain since the announcement alone in one month’s time (adding almost $300 billion of market cap) amounts to more than the entire Toyota company! Think about that for a moment. Tesla has added the value of the world’s most profitable and largest automaker in the blink of an eye on no fundamental news whatsoever. Continue reading “Tesla: Some Perspective”

Labor Market and Small Business Health Update

I’ll make this quick.

I speak a lot about U.S. stock market valuations because they are at historical extremes exceeding both the pre-Great Depression peak and the Dot-Com Bubble peak, however, today I wanted to focus on the labor market, specifically. It’s important we understand the progress that’s been made there.

From February to April the U.S. lost over 22 million jobs. This caused the official unemployment rate to skyrocket to almost 15% from 3.5%. There was a bit of a v-shaped bounce starting in April/May as some jobs were quickly regained. However, job growth has begun stalling. Continue reading “Labor Market and Small Business Health Update”