Of Two Minds – The Two Charts You Need to Ignore or Rationalize Away in 2020 (Unless You’re a Bear)
As recently as February 2016, total market cap of U.S. stocks was less than $19 trillion. The value of U.S. stocks have risen by almost 75% in a mere four years, yet the Fed’s QE is supposed to have the exact same effect in an $33 trillion market as it did in an $18.9 trillion market?
And this assumption is based on what, other than magical thinking?
Speaking of magical thinking, take a look at Apple’s operating income, which has actually declined while its price per share doubled from $145 in January 2019 to $293 in January 2020. Other than mass delusion or Martian Mind Control, the only possible explanation for the doubling of the value of a company whose operating income is at best stagnant is the same dynamic: punters have front-run all the potential gains of the future to double Apple’s share valuation in one year.
All those analysts predicting a billion Apple Watch sales to recession-impoverished consumers and Apple eating Disney’s lunch because Apple has squandered millions on entertainment “talent”–you’re joking, right? Every attempt to replace declining iPhone revenues with “services” or “wearables” in an exercise in magical thinking.