It is not possible for corporate revenues...wages...or federal spending to grow much faster than that for very long. And even that GDP number is a bit of an imposter.
One question Bill; why have you never questioned the borrowing associated with supporting the influx of Biden's illegal migrants from all around the world? That cost has to be in the billions if not the trillions. Seems that this would warrant some comment? Maybe you could compare financing the Space Force versus free housing, food, healthcare, education and the cost from crimes committed by Biden's illegals. I have my own opinion as to which is better for the nation, but what have you got to say about it.
Excellent article. Bill Bonner asks the most important question investors should always ask during euphoric periods: Where is all the money coming from?
I strongly agree with the thesis that asset prices and corporate profits have become increasingly detached from real economic growth. The difficult part is not recognising the imbalance, but understanding what could actually trigger a meaningful realignment between prices and fundamentals.
As long as central banks continue expanding liquidity whenever asset prices weaken, it is hard to imagine a sustained correction. Policymakers are not only concerned about falling asset prices themselves, but about their effect on credit creation and economic activity.
Ludwig von Mises described this dynamic more than a century ago in The Theory of Money and Credit (1912). Once an economy becomes dependent on continuous credit expansion, even a meaningful slowdown in credit growth can expose underlying fragilities and risk a sharp economic reversal. Policymakers, therefore, become institutionally and politically incentivised to support the system with ever-increasing quantities of credit and liquidity.
In many ways, we saw this mechanism play out even before COVID. The late-2019 deterioration in liquidity conditions and funding markets was sufficient to trigger visible stress in both the economy and asset prices, prompting central banks to intervene once again.
The real question may not be whether valuations are disconnected from fundamentals, but whether a modern debt-based financial system can still tolerate genuine market discipline.
The answer to the inflated mag 7 revenue numbers is (at least partly) explained in the evening news. Bill's partner Dan Denning has already explained this as well. ChatGPT, nVidia, Oracle, and many other chip and software companies have multi-hundred billion dollar contracts with each other. The money is sloshing among them, inflating all their revenues. Wealth creation is a function of creating new things of value. Revenue (and by extension GDP) is more a function of money flow, or the velocity of money through the economy. Also a longstanding economic principle.
Erik, So true. Circular financing among the tech giants pertaining to A.I. as Bill, Dan, & Tom have pointed out; and, especially Bill's good (best?) friend Addison Wiggin, who has written extensively about A.I. Mr. Wiggin also points out that these A.I. data centers desperately need power, and they are already getting stiff resistance from regular folk in states where they operate or want to operate. These folks don't want their electricity rates to skyrocket or especially any rationing of power just to serve these centers, which are heavily automated and thus don't employ lots of folks. You can bet that the state public service commissioners will come down on the side of those who have the most votes, which is not remotely the A.I. titans. And voters will make the state reps/senators and governor pay dearly if they side with the A.I. titans.
The problem is that, following Dear Leader in spirit/basic beliefs, Americans today are fundamentally committed to a combination of 1) “Jesus will save us”(regardless of what impossibility we believe in) and 2) God’s unlimited permission slip to the Israelis that they and only they alone can obliterate completely any one or any group for any reason. Even though this toxic combination failed in all 4 crusades, True Believers haven’t given up and are willing to risk the destruction of all civilization to make their point and return the world to the Middle Ages or worse, a global Jericho.
I personally believe they’re doomed to fail at the border of Iran, but will create enormous damage and poverty even if they make that fatal move. I also believe that the “deciding” “decision” (lol) will be made this week in Beijing where Trump (yes, even that most egotistical and blinded bigot on the planet) will be able to witness first-hand a society, the most helpless on earth 90 years ago (and saved by America, something the Chinese celebrate still), the poorest on earth when in 1980 the Communist government tossed out blind Communism adopted the US free enterprise system, and the most peaceful on earth (having invaded 2 countries in 3000 years—something Trump and Netanyahu equaled in 3 weeks). I even think there is a possibility that Trump will become aware of one or two of of his many (unintentional) gifts to making China the planet’s #1 in so many categories.
I wish he could experience what I am enjoying tonight in my favorite hotel: lying in bed messaging Bill, while riding 1100 miles in 10 hours from Guangzhou (Canton) in South China to Beijing in the north, so I can see his expression when he sees how smoothly a city of 20 million people operates: 10 million subway rides/day; wide streets packed with millions of car, none of which even have a dent (slight exaggeration alert), schools with 40 kids in a classroom eager to learn, etc, etc.
At least he won’t see my “Disappointed Trump Voter” sign. Every single Chinese friend of mine expressed horror and revulsion at the very thought of insulting a guest in that way (and several pointed out that it’s still illegal—even in the face of so much progress and and real prosperity).
Maybe I’m wrong about that even. One of his 10-30 messages I receive each day from Dear Leader just flashed across the top of my screen: he wants me to be a special advisor to him personally., yuk yuk. I don’t think I’ll fall for that and have to commit the fundamental mistake I made 2 years ago when I donated to his campaign (and unleashed the daily avalanche of appeals for “donations”!
While it’s sad that this person?, human?, warmonger?, deceiver? will determine the basic direction of our future and make one of the most important decisions in the history of the world in a few hours. My bet is on Xi charming him this time and giving up the lost cause in Iran. No one else would earn such wide-spread approval if he has the courage to say “no” to the Israelis and risk a sudden flood of Epstein photos and information. Then, too, maybe the Jesus people are correct in believing in miracles.2
It has been apparent for some time that far more currency (credit) is being created and injected into the financial plumbing than has been admitted to by the Fed, treasury or TPTB - official statistics and reports are just cover for the massive debasement that has been occurring. David Rogers Webb outlined his observations in his book "The Great Taking". Official "inflation" numbers are now just laughable and fly in the face of even casual observation of what is actually occurring in the real world. Credit must continue to expand at all costs and the main actors have personal stakes in keeping "the Emperor has no clothes" game going for as long as possible - when does the average person finally clue in...
You mention that you cannot use Government spending to create more Government spending. Why not? Isn't that the business model for AI- the greatest boom ever (or at least in human memory?
The stock market is an illusion, in the sense that all the shares of a company are assumed to be worth what the most recent trade settled it. Thus, if most of the stock is held in accounts that don't trade much (index funds, I'm looking at you, among others) then the ones who do trade set the price. But when more traders decide to sell than there are buyers for that stock, the price goes down. A stock can easily lose 10% of its "value" with less than 1% of its shares traded. And if everyone gets scared and is trying to sell, while there are few or no buyers, then reality can get priced in very quickly.
Stocks are currently trading at prices where there are - currently - a balance of buyers and sellers, but that balance can easily reset, and will likely do so with little warning. It will find a bottom down there somewhere, but the process of finding it will be very painful.
The elites need more and more liquidity to exit their current positions into any store of value.
Bitcoin follows the market, if there's a correction it too will correct. I've wondered with all these data centers being proposed and blocked by communities, might the Bitcoin miners take up the mantel of providing the power for AI? The cost to mine Bitcoin to a degree sets the price. When the price of Bitcoin falls the miners sell Bitcoin to pay the bills. The AI paycheck would seem more inviting. Without the miners Bitcoin might go to zero.
GDP is only growing at a 2% rate. And.... it includes government spending. Thats funny so what is that $500+ B whatever that number happens to be today. Hell, maybe its all government spending that makes up GDP. But GDP could simply mean going down possibly.
The 9 trillion increase in the stock market is the revaluation of the stock from the beginning of the year to the end. There was significantly more demand during the year than before. Some of that is related to the significant foreign investment that has moved into the US stock markets. Something like 18% of the stock market is now attributed to foreign investment. That is a 450% increase in the last 15 years. A lot of the runup this year was done with appreciating share prices. That makes it look like money from nothing but it actually represents wealth pouring into the US from abroad.
One question Bill; why have you never questioned the borrowing associated with supporting the influx of Biden's illegal migrants from all around the world? That cost has to be in the billions if not the trillions. Seems that this would warrant some comment? Maybe you could compare financing the Space Force versus free housing, food, healthcare, education and the cost from crimes committed by Biden's illegals. I have my own opinion as to which is better for the nation, but what have you got to say about it.
😂😂
Excellent article. Bill Bonner asks the most important question investors should always ask during euphoric periods: Where is all the money coming from?
I strongly agree with the thesis that asset prices and corporate profits have become increasingly detached from real economic growth. The difficult part is not recognising the imbalance, but understanding what could actually trigger a meaningful realignment between prices and fundamentals.
As long as central banks continue expanding liquidity whenever asset prices weaken, it is hard to imagine a sustained correction. Policymakers are not only concerned about falling asset prices themselves, but about their effect on credit creation and economic activity.
Ludwig von Mises described this dynamic more than a century ago in The Theory of Money and Credit (1912). Once an economy becomes dependent on continuous credit expansion, even a meaningful slowdown in credit growth can expose underlying fragilities and risk a sharp economic reversal. Policymakers, therefore, become institutionally and politically incentivised to support the system with ever-increasing quantities of credit and liquidity.
In many ways, we saw this mechanism play out even before COVID. The late-2019 deterioration in liquidity conditions and funding markets was sufficient to trigger visible stress in both the economy and asset prices, prompting central banks to intervene once again.
The real question may not be whether valuations are disconnected from fundamentals, but whether a modern debt-based financial system can still tolerate genuine market discipline.
The answer to the inflated mag 7 revenue numbers is (at least partly) explained in the evening news. Bill's partner Dan Denning has already explained this as well. ChatGPT, nVidia, Oracle, and many other chip and software companies have multi-hundred billion dollar contracts with each other. The money is sloshing among them, inflating all their revenues. Wealth creation is a function of creating new things of value. Revenue (and by extension GDP) is more a function of money flow, or the velocity of money through the economy. Also a longstanding economic principle.
Erik, So true. Circular financing among the tech giants pertaining to A.I. as Bill, Dan, & Tom have pointed out; and, especially Bill's good (best?) friend Addison Wiggin, who has written extensively about A.I. Mr. Wiggin also points out that these A.I. data centers desperately need power, and they are already getting stiff resistance from regular folk in states where they operate or want to operate. These folks don't want their electricity rates to skyrocket or especially any rationing of power just to serve these centers, which are heavily automated and thus don't employ lots of folks. You can bet that the state public service commissioners will come down on the side of those who have the most votes, which is not remotely the A.I. titans. And voters will make the state reps/senators and governor pay dearly if they side with the A.I. titans.
The problem is that, following Dear Leader in spirit/basic beliefs, Americans today are fundamentally committed to a combination of 1) “Jesus will save us”(regardless of what impossibility we believe in) and 2) God’s unlimited permission slip to the Israelis that they and only they alone can obliterate completely any one or any group for any reason. Even though this toxic combination failed in all 4 crusades, True Believers haven’t given up and are willing to risk the destruction of all civilization to make their point and return the world to the Middle Ages or worse, a global Jericho.
I personally believe they’re doomed to fail at the border of Iran, but will create enormous damage and poverty even if they make that fatal move. I also believe that the “deciding” “decision” (lol) will be made this week in Beijing where Trump (yes, even that most egotistical and blinded bigot on the planet) will be able to witness first-hand a society, the most helpless on earth 90 years ago (and saved by America, something the Chinese celebrate still), the poorest on earth when in 1980 the Communist government tossed out blind Communism adopted the US free enterprise system, and the most peaceful on earth (having invaded 2 countries in 3000 years—something Trump and Netanyahu equaled in 3 weeks). I even think there is a possibility that Trump will become aware of one or two of of his many (unintentional) gifts to making China the planet’s #1 in so many categories.
I wish he could experience what I am enjoying tonight in my favorite hotel: lying in bed messaging Bill, while riding 1100 miles in 10 hours from Guangzhou (Canton) in South China to Beijing in the north, so I can see his expression when he sees how smoothly a city of 20 million people operates: 10 million subway rides/day; wide streets packed with millions of car, none of which even have a dent (slight exaggeration alert), schools with 40 kids in a classroom eager to learn, etc, etc.
At least he won’t see my “Disappointed Trump Voter” sign. Every single Chinese friend of mine expressed horror and revulsion at the very thought of insulting a guest in that way (and several pointed out that it’s still illegal—even in the face of so much progress and and real prosperity).
Maybe I’m wrong about that even. One of his 10-30 messages I receive each day from Dear Leader just flashed across the top of my screen: he wants me to be a special advisor to him personally., yuk yuk. I don’t think I’ll fall for that and have to commit the fundamental mistake I made 2 years ago when I donated to his campaign (and unleashed the daily avalanche of appeals for “donations”!
While it’s sad that this person?, human?, warmonger?, deceiver? will determine the basic direction of our future and make one of the most important decisions in the history of the world in a few hours. My bet is on Xi charming him this time and giving up the lost cause in Iran. No one else would earn such wide-spread approval if he has the courage to say “no” to the Israelis and risk a sudden flood of Epstein photos and information. Then, too, maybe the Jesus people are correct in believing in miracles.2
It has been apparent for some time that far more currency (credit) is being created and injected into the financial plumbing than has been admitted to by the Fed, treasury or TPTB - official statistics and reports are just cover for the massive debasement that has been occurring. David Rogers Webb outlined his observations in his book "The Great Taking". Official "inflation" numbers are now just laughable and fly in the face of even casual observation of what is actually occurring in the real world. Credit must continue to expand at all costs and the main actors have personal stakes in keeping "the Emperor has no clothes" game going for as long as possible - when does the average person finally clue in...
You mention that you cannot use Government spending to create more Government spending. Why not? Isn't that the business model for AI- the greatest boom ever (or at least in human memory?
The stock market is an illusion, in the sense that all the shares of a company are assumed to be worth what the most recent trade settled it. Thus, if most of the stock is held in accounts that don't trade much (index funds, I'm looking at you, among others) then the ones who do trade set the price. But when more traders decide to sell than there are buyers for that stock, the price goes down. A stock can easily lose 10% of its "value" with less than 1% of its shares traded. And if everyone gets scared and is trying to sell, while there are few or no buyers, then reality can get priced in very quickly.
Stocks are currently trading at prices where there are - currently - a balance of buyers and sellers, but that balance can easily reset, and will likely do so with little warning. It will find a bottom down there somewhere, but the process of finding it will be very painful.
... the stock market is the reflection of the nation's economic sentiment.
Folks pile in when they see others make gains...
...or have nowhere else to put investment/hedge money.
Financial advisors warn with arms flailing "equities are too high!"
Yet the virtual customer line at brokerages are longer than ever...
The elites need more and more liquidity to exit their current positions into any store of value.
Bitcoin follows the market, if there's a correction it too will correct. I've wondered with all these data centers being proposed and blocked by communities, might the Bitcoin miners take up the mantel of providing the power for AI? The cost to mine Bitcoin to a degree sets the price. When the price of Bitcoin falls the miners sell Bitcoin to pay the bills. The AI paycheck would seem more inviting. Without the miners Bitcoin might go to zero.
GDP is only growing at a 2% rate. And.... it includes government spending. Thats funny so what is that $500+ B whatever that number happens to be today. Hell, maybe its all government spending that makes up GDP. But GDP could simply mean going down possibly.
The 9 trillion increase in the stock market is the revaluation of the stock from the beginning of the year to the end. There was significantly more demand during the year than before. Some of that is related to the significant foreign investment that has moved into the US stock markets. Something like 18% of the stock market is now attributed to foreign investment. That is a 450% increase in the last 15 years. A lot of the runup this year was done with appreciating share prices. That makes it look like money from nothing but it actually represents wealth pouring into the US from abroad.
I'm thankful the so-called stock market is bonkers. If all of that "money" were on Main Street, most of us would be absolutely toast. Best always. PM
Soooo... When does it all CRASH? Is it time to get out of stocks now? Or is this crazy rise in stock values just going to continue, for how long?
like old wine Bill .. just keep it comin' old hound dog .. the end is near eh? we hope...