IN THIS EDITION
•FROM SQUEEZE TO CRUSH: We don’t normally discuss our views on the stock market except in relative terms vis-a-vis bonds or commodities, but in this edition we take a direct look and conclude that the stock market is now not only fundamentally overvalued but at risk of a major correction. In all probability, should that occur, commodity prices are likely to correct in tandem, yet also outperform on the downside. Why? The explanation lies in the key reason why we believe the stock market is overvalued, which is due to a growing squeeze on profit margins, a result of pervasive commodity price inflation not only around the world but, as demonstrated by some recent data, in the US as well.
•IF WE WERE IN CHARGE: As we are consistently highly critical of the current set of fiscal and monetary policies in many countries, including the US, we do try, from time to time, to make suggestions for how we would do things were it up to us. Yet we see little if any political support for the sorts of policies that we believe are necessary to place economies back on a path of sustainable economic growth. Nevertheless, there is some reason for longer-term optimism, in that more and more investors are voting with their capital in a way which, over time, can force enormous, salutary changes on the global economy. As such action is entirely voluntary and non-violent, it can be considered consistent with, if obviously less heroic than, other forms of voluntary, non-violent behaviour which, in the movements led by Mahatma Gandhi and Martin Luther King, Jr, respectively, where hugely successful. Perhaps in the current instance investors need only be patient, rather than heroic.
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