Dear reader, if you are overcome with fear of missing out on the next stock market move; if you feel like you have to own stocks no matter the cost; if you tell yourself, ‘Stocks are expensive, but I am a long-term investor’; then consider this article a public service announcement written just for you.
Before we jump into the stock discussion, let’s quickly scan the global economic environment.
The health of the European Union did not improve in the last year, and Brexit only increased the possibility of other ‘exits’ as the structural issues that render this union dysfunctional went unfixed.
Japan’s population has not gotten any younger since the last time I wrote about it – it is still the oldest in the world. Japan’s debt pile got bigger, and it remains the most indebted developed nation (though, in all fairness, other countries are desperately trying to take that title away from it). Despite the growing debt, Japanese five-year government bonds are ‘paying’ an interest rate of – 0.10 percent. Imagine what will happen to its government’s budget when Japan has to start actually paying to borrow money commensurate with its debtor profile.
Regarding China, there is little I can say that I have not said before. The bulk of Chinese growth is coming from debt, which is growing at a much faster pace than the economy. This camel has consumed a tremendous quantity of steroids over the years, which have weakened its back – we just don’t know which straw will break it.
This post was published at Zero Hedge on Oct 12, 2017.
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