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hardnox
Advisor

Deregulation and the stock market

I'm pretty well nigh 100% certain of this.

 

The stock market is already discounting tax cuts which probably will happen but seem quite a lot less certain than they did 6 months ago.

 

But I think the major reason why stocks are strong is that from the inauguration forward the Trump Admin gave orders for all financial regulators to stand down, so companies are more free than ever to say earnings are whatever they want them to be.

 

The managers and boards that run companies exist on a very short time horizon- a couple of years to make the share price go up and cash in huge on bonuses and options. The risk/reward ratio is fully a symmetric- you might get caught and if you do the worst thing (under Obama/Holder) was that the shareholders will have to pay the judgement. That doesn't balance with the chance to get FY rich, which is what USA ca. 2017 is totally about.

 

That doesn't mean that those practices or the bull market have to end anytime soon. Although the business cycle is long in the tooth and one of the necessities of this sort of post-capitalist scamming is that sooner or later you need a recession so that the companies can throw all the crap into a couple quarters and management can say "bad economy, whocouldathunkit?" That tends to exacerbate the downturn.

The "benefits" of deregulation are about 80% financial. 

 

Sure, if you don't have to comply with certain environmental or workplace regs it enhances the bottom line for a bit but only slowly and once.

1 Reply
hardnox
Advisor

music to your ears

https://www.the-tls.co.uk/articles/public/trump-dynasty-luttwak/

 

The 16 year reign of the Trump dynasty (although not sure what has/will be addressed other than playing to anger and grievances)..

 

He's doing the suffering middle class routine, uses car affordability data to support his case.

 

It is true- most people can't afford to buy cars any more but a whole bunch were sold over the last 6 years leaving a whole lot of subprime debt in distress and a lot of people further losing access to credit.

 

The replacement cycle has run its course and we've had another month of bad auto sales. Tighter credit and a fair amount of replacement having been done. While autos aren't the driver of the economy they once were they're still huge. The post-crisis recovery is losing steam.

 

The state of car costs is similar to healthcare in that most want/need it but a substantial number can't really afford it any more. Tricky though- if you want to go full Denninger and jerk 17% of the economy back to 10% most are going to die crossing the river- even if it is 3 feet deep "on average."

 

Still awaiting anything from either side addressing what to do when the majority of people are now effectively priced out of an essential element of our sprawl lifestyle, and healthcare.