American Economics Thread
- Thread starter Bernard
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Its not a coincidence that stuff like Private Equity or asset management firms investing in private markets is on the rise these days.
All of it is.
Interesting article. The pride and public selling point of the US economy has historically been its startup market. The possibility to go from nothing to billions with a single idea. This is the market dynamism and innovation that was promised as the tradeoff for inequality.
Yet according to this article, in 2022 the IPO market hit record lows at $8 billion only and is staying low. And it's not just a few places reporting this, it is a well known fact!
More worryingly, the IPO market is underperforming the SP500, showing that IPOs are unable to disrupt incumbents who are getting more and more entrenched, sucking oxygen out of the real economy the same way high interest rates and inflation have.
This shows innovation in the US economy has been at a standstill.
Another thing is: why are gold prices still sky high?
When the US emerged from the 2008 financial crisis, gold prices crashed in 2012-2019 as gold investors left for higher yielding stocks (especially tech IPOs). This was expected behavior.
Yet today they're stubbornly high despite high stock valuations and high interest rates to boot. Why?
This is my guess.
But first, I really like those articles David Goldman wrote about gold over the years at AsiaTimes. Here is one of them.
Anyways, this is my guess.
Goldman was asking the exact same thing for himself. And by doing that work he did, he did show that the gold price is much higher, relatively speaking, when compared to other financial instruments.
So why is gold near all time highs?
My guess is three reasons.
1) The US dollar could be in trouble, or the risk of the US dollar being trouble causes the gold price to remain high. The US Federal budget deficit and trade deficit are not going away any time soon. The risk to the USD losing value can only increase.
Note, this is not to say the USD will lose its reverse currency status, that is not important. What is important here, is what is the USD actually worth? Well, it is worth that much gold, and if it gets in trouble it would be worth less compared to gold, meaning more higher gold prices.
2) Demand from other countries, principally China, Russia, and countries in West Asia, they want their gold for various reasons, and hence more demand propping up the price.
3) The rally of everything, is what I like to believe. Jerome and his printing presses, flood the system with money everywhere. That money has to go somewhere. So it goes somewhere everywhere, some places aka asset classes get more, other asset classes get less. This will range from stocks to bonds to real estate to commodities like gold and even to Bitcoin that funny kind wild money.
That is the trick. Does not matter if one reason or correct or all three, if just one of them is correct, and somebody out there probably thinking the same thing to at least one of these reasons, that will support the gold prices at these levels.
So there is actually follow up question, which is important. What will change to affect the gold price, up or down.
If we look at those three reasons, there could more, just those three how will those three change, and we realize, nothing will change.
Hence, gold should be near its all time highs and going higher.
My personal belief is the rally of everything. Why not. People go crazy over everything. And there is still no fever, like gold fever.
Looks like, there's a good chance of another round of small and medium US banks going broke/down in the next 1ish month.
As well as the possiblity of US commercial real estate 'exploding', although, it's only a possibility (still not to be underestimated).
this is not unusual. IPOs broadly underperforming has been well documented for a long period of time; this is generally attributed to broad market index firms having survivorship bias.
I wonder if the back to office mandates from companies are a misguided attempt at rescuing commercial real estate.
Duh. Of course they are.