The start of a new bubble – MoneyWeek

So,asSimonBlackoftheSovereignMannewsletterputsit,evenifAmericaweretocutout100%ofitsdiscretionaryspending(themilitaryandsoon),thecountrywouldstill“beintheholebyaquarterofatrilliondollars”。

That’sanumberthatisgoingtokeeprising:America’sdodgydemographicsmeanthateveryday10,000newpeoplestartreceivingsomekindofmandatorypayment。

Theremighthavebeenatimewhenallthiscouldsomehowhavebeenpreventedbut,whileweareboundtoseesometaxhikesandspendingcutsfromhere,itisalmostimpossibletoimaginethembeingdramaticenoughtobringrevenuesandspendingcloseenoughtogethertoreducethedeficitbymorethanaroundingerror。

Theonlywayoutthen,asFabersays,ismoneyprinting(“untilthesystemcollapses”)andinflation。

Sowhatdoesallthistellyouaboutthemarket?

Theelectionresultitselftellsyounothing。

TherehaslongbeenageneralviewthatthepartyofthemanintheWhiteHousemakesadifferencetothewaythestockmarketperforms。

Itdoesn’t。

Lookatthecharts(therearelinkstosomeonourblog)andyouwillseethereisnodiscernibledifference。

WhatmatterstothemarketisnotwhoisintheWhiteHouse,buthowcheapstocksarewhenhearrives。

Rightnow,Americanstocksaren’tcheap。

However,thedeficitandtheslowgrowthratesoftheUSeconomydotellyousomething。

AsJohnStepeknotedinourMoneyMorningnewsletterthisweek(WhyyoudontneedtoworryabouttheUSelection)?

“thestockmarketintheUSperformsthesamepoliticalfunctionasthehousingmarketdoesinBritain”–aslongasitisn’tfalling,mostpeoplefeelOK。

Sojustasourpoliticiansappeartodevotethemselvesalmostentirelytokeepinghousepricesup,USpoliticiansspendfarmoretimethanreallifewarrantsworryingaboutthestockmarket。

ForFaberthismeansthatanymajorfallonthebackoflousyfundamentalswillmeananewkindofquantitativeeasing–theFedbuyingintothestockmarketdirectly。

Theresult?

Abrandnewstockmarketbubble,oneborndirectlyoutoffailure。

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