How Leviathan Broke The World In 1973
Inside today’s Daily Journal…
Essay: Trump, Iran, And The Next Crisis
Data centers outspend the government
Central bankers’ inflation misses
Nvidia goes robotic
Chart Of The Day… Insurance
Today’s Mailbag
I suspect when you start to read today’s Journal you’ll think, Oh, I’ve read this before.
But, trust me, you haven’t. Because the ending has never happened in America before.
This week’s Journals are going to be especially important – perhaps the most important of my entire career. I hope you will read them very carefully.
Let’s start with the part of the story that you probably do know.
In 1972 the market was carried by 50 stocks. They called them the Nifty Fifty: IBM (IBM), Xerox (XRX), Polaroid, Avon, McDonald’s (MCD), Coca‑Cola (KO), The Walt Disney Company (DIS), Merck (MRK). Investors decided these were the only companies worth owning. They bought them at any price. The average stock in the group traded at 41.9x earnings, more than double the 18x to 19x for the S&P 500. Polaroid traded at 95x earnings. McDonald’s and Disney at 71x.
These were so‑called “one‑decision stocks.” You bought them once and you never sold, because the growth would justify the price, eventually. The money piled into the same handful of tickers. And as the stocks went higher and higher, the thesis was proved: these were the only stocks investors needed.
It’s easy to see the correlation to today’s incredible bull market. But the concentration is even more intense than 1972. It’s not the Nifty Fifty. Today it’s more like five stocks. One company, Nvidia (NVDA), is worth more than $5 trillion by itself. Apple (AAPL) trades at 38x earnings. Tesla (TSLA) trades at 232x.
Like I said at the beginning – this probably sounds familiar.
You’ve heard this before and you either don’t care because you want to own stocks that are going up, or you don’t care because you’re not crazy enough to own a $5 trillion company trading at 20x sales (Nvidia).
But you should care, even if you don’t own these stocks, because this equity bubble is a sign of much bigger problems in our economy. Here’s what you haven’t been told about these bubbles: they aren’t really created by equity investors. They are created by the government.
Do you remember what former U.S. Attorney General Pam Bondi said to members of Congress when asked about why the Jeffrey Epstein files still hadn’t been released as promised? She said: Who cares? The stock market is at a new high.
When the people who control the money-printing press want a bull market to justify their policies, look out.
