Capitalism has not been having a nice time lately. It seems petulant and fretful. There’s a reason for that.
Investors are definitely getting out of the US stock market. Foreign investors in particular are leaving Ground Zero ASAP. This week’s rather soggy margin trading-like bounce still leaves the Dow 3000 points down on the month.
The US property market, a core component of US capital, looks “unconvincing”, to put it politely. Markets like California and Florida are still queasy after their local issues and the rest of the market is flat at best.
There is no clear sense of direction, much less any sort of lead for investors. Every day brings new impacts to something in the various investment sectors. This doesn’t do much for investor confidence, with good reason.
This time it’s a bit different. When high prices for anything and everything are the norm, any loss of capital is that much more expensive. By comparison, in 2008 a relatively far more affluent economy got poleaxed by market moves. The economy still hasn’t really recovered.
This time, a cash-strapped economy that was already under severe cost pressure is getting hit with multiple blows to capital and it doesn’t like it.
This isn’t just hedge fund hypochondria. US corporate bankruptcies were already surging in November.
In the past, multi-billion dollar debacles were real shocks. Now, they’re normal and daily. Outcomes matter. The first measurable effects of US tariffs will be visible in a week or so. That is going to cause some issues for analysts, but much more so for the administration.
These will be the indicators of where the Blunder Bus is going, and how fast.
It may come as a surprise to American market watchers, but “Hooray for us!” isn’t considered a useful valuation by major investors. The ever-widening credibility gap is being handled very badly.
Put it this way – If it looks like a roadkill and acts like a roadkill, it’s a roadkill for investment purposes.
For a mega-motormouth administration, that’s a problem. Why would I resist overloading a metaphor like that?
If this mess tanks immediately, which looks certain, excuses are going to be very hard to sell, even to the idiots who believe them. The administration, which is 50 50 between child psychology marketing and feet-in-mouth rhetoric, can’t talk a squashed gerbil into an eagle. People will see the difference.
Let’s take a minute now to indulge the standard current conspiracy theory – “First devalue everything, then buy in at rock bottom”. No, not this time. That’s 1980s asset stripping you’re talking about.
Most of these regularly 18-wheeler curated “assets” are deeply indebted, obsolete, unprofitable, or just extinct in too many ways. They wouldn’t be good investments even if they were solvent.
Add trade barriers and a wholesome population of broke people from sea to shining sea, and you couldn’t give these “assets” away to a conscientious masochist.
America is so toxic an investment environment it’s simply not worth thinking about. To be fair, it already was usually toxic, but this is now untreated sewage level.
This exceptionally risky investment environment will cost you. The only question is how much.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
