Amazon reached a whopping P/E of 99x. Looking back, we’ve seen the stock market rise to all time highs from it’s 2009 lows of the Dow Jones Industrial Average hovering around 7K to the most recent peaks that reached 29K shortly before the coronavirus made a full out break bringing the global economy to nearly a complete screeching halt. Since the outbreak, we reached levels that might have seemed normal even less than 4 years ago, of about 18K which could indicate the new market bottom. The daunting question is does this even make any sense?
Back in February we wrote an article titled “Stock Market Crash 2020 – 5 Reasons”. So far there has been quite a bit of merit on this particular article, but their are still a few of the reasons that haven’t rear it’s ugly head. There are no crystal balls here, but particularly the bond market is one that is of significant concern especially those for the public sector. One can anticipate there’s going to be a stagnation of income for public entities from low tax revenues to drastic shortage on collections of such things as tolls. This is from townships to states of which many were heavily on the red before the coronavirus outbreak.
Of the previous anticipated reasons, one element that was not mentioned is the pressures of traditional lending on individuals and businesses from mortgages, credit cards, car loans to the notorious pay-day-loans. Well, let’s make a little emphasis particularly to credit cards and pay-day-loans that often come with high interests and are aggressively the tools of our financial industry that siphons disposable income from the middle class to the low income families; if they even have disposable income to spare.
While it may be true that Amazon is the king of companies during this pandemic, looking to hire some 75,000 new employees, that still pails in comparison to the staggering number of unemployment claims which has surpassed 16 million as of last week alone. Giving a more broader outlook at the economy as a whole.
Another element to consider, is that the timing of this current crisis may have come in relatively good one for the purposes of financial perception, as most people have filed for their tax returns and many more are getting stimulus money that will supplement their current income. But how will this unfold another 8 months from now? Perhaps, companies in Wall Street will have to squeeze a little more here and there to ensure that they can appease the markets. Or perhaps most consumer discretions and that very anticipated vacation will just need to take a back seat until next year.
One final thought, is that perhaps, this current pandemic was exactly what the global markets needed in order for the world to justify the printing money to alleviate their debt burden with more debt, giving themselves another roll at the dice for future generations to deal with.
So, what awaits our economy before the end of 2020? There’s absolutely very little that makes sense, even with trillions of dollars of printing paper. One thing is certain, if you can’t find toilet paper, you could most likely dig into your pockets and find a few dollar bills.
COMMENTS