The Investment Guru and Author of Street Smarts says Trump will spend as much money as he can and wherever he has to in order to get re-elected.
What is happening to the world? Everybody is simply trying to use the word liquidity. When I ask experts why are markets going up when the world is looking bad, the simple answer is it is liquidity, it is Fed, it is money.
The main thing that is going on in the world is that central banks all over the world are printing huge amounts of money and governments are borrowing and spending huge amounts of money. Every day the Bank of Japan goes in there and starts printing money as fast as it can and is buying stocks, buying ETFs, buying bonds. About somewhat the same is happening all over the world. In the US, they are not buying stocks. We do not think yet, but they are buying everything else. This is insane. But it is great for investors, it is great for stockbrokers, it is great for ETNow. Is it good for the world? No.
So if global central bankers are likely to print more money and if interest rates are likely to remain low, then what could be the end game for equities and for this so-called summer madness which we have seen in just about every asset class?
First you must remember that in America, there is an election in Nov. And in Washington, they are doing everything they can to get re-elected. That is what they do. They do not care about us. They do not care about our children. They care about getting elected. So until November anyway, this is all going to continue in the US. But other places will probably follow too. The end game? Well often in history, after a long rise in the market, it turns into a blow off bubble, especially when there is a huge amount of money that suddenly comes in. I am not very good at timing the market, but I suspect we may have a blow off at least in the American stock market, and maybe the Japanese stock market, because of all this madness that is going on.
So to your mind what is the importance of this year’s presidential election?
It is hugely important, because the person in charge -- it always happens not just in America, all over the world -- wants to get re-elected. So the person in office and his party will do everything they can to get re-elected. And in American history anyway, it is very difficult to replace a President who is in power, because he has the ability: if he needs money over here, he spends a lot of money over here. The Opposition cannot do that, and usually presidents get re-elected. Mr Trump certainly wants to get re-elected, and he certainly will spend as much money as he can and wherever he has to to get re-elected.
God forbid, but if there is a second wave of coronavirus, how do you think markets are likely to react to that?
Well, most governments will not close down a second time around. At least they will not be as draconian as they have been the first time around, because they have realised the cure can be worse than the disease. In some countries, the cure has been worse than the disease. So, you will not see that again. You may see areas close down, but the basic economic damage has been done, that will be more if there are more close-downs, but countries now realise they have to eat and they have to survive and closing everything down will not work.
( Originally published on Jun 24, 2020 )
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