Do You Believe the Stories? When Will Australian People Rebel?

Dear Reader,

Be honest with yourself. Are you a complicity theorist? Someone who believes what you’re told by the media, by the government, by the financial establishment?

Or do you question the stories you’re being told? WHY you’re being told those particular stories at this particular time? We’ll come back to how these stories are intended to cow the general public into submissiveness. But first…

What the heck happened on Wall Street last week? Prior to Thursday and Friday’s bloodbath, the S&P 500 had notched up 22 new record highs this year. The Nasdaq 100 had done even better. It had made 43 record highs in 2020, mostly on the back of insatiable ‘investor’ demand for tech stocks like Facebook, Apple, Google, Microsoft and Amazon.

Even the stodgy old Dow Jones Industrials had managed to close above 29,000 for the first time since February. It was within 2% of making a new high when the carnage struck. But I’ll be honest. I was not surprised. Or, if I was, I was only surprised that the correction to ‘animal spirts’ had taken so long. Earlier in the day, I’d prepared the chart below for readers of The Bonner-Denning Letter.

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Tech eating the S&P 500

Port Phillip Publishing


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The chart shows the ratio between the Nasdaq 100 and the S&P 500. You can see that just this summer (in the US) tech stocks have reached a new record level against the S&P 500. The last time tech was this expensive relative to the broader market was…2000. Hmm. What do you make of that?

Different from the tech boom of 2000

I make two things of it. First, the chart shows you how brutal a secular bear market can be. When tech crashed in 2000, it took years for it to recover. A drawdown of over 50% now (which is what I expect in the S&P 500) is likely to be accompanied by numerous recessions. It will take a long time to recover from a drawdown like that. The economy will shuffle in and out of lockdown, shedding jobs, incomes, businesses, and earnings. It’s not ‘priced’ for that right now.

The second thing I make of the chart is that is that nothing ever happens all at once. The Nasdaq Composite (a broader version of the index) is up 26% year-to-date. Many of the momentum darlings of the market — Amazon etc — have actual earnings and a story to explain how they’re becoming bigger and important in an economy where many people work, learn, and generally live behind the closed doors of home.

So that’s different from the tech boom of 2000. Many of the darlings of THAT market (I remember it well, it’s when I cut my teeth picking small-cap stocks as an analyst) didn’t have earnings. Many didn’t even have a product. Some didn’t even have a business plan. They were companies cashing in on a rush of enthusiasm about the future of the ‘digital’ world.

Well, that future is here. Some of it is great. And some of it — lack of privacy, mass surveillance, relentless micro-targeting of marketers based on OUR data — sucks. But here’s the only important question now: are investors paying too much today for future tech cash flows that may never materialise? Has this period of prolonged overvaluation in stocks been the prelude to the inevitable, cyclical, mean-reverting cycle?

Yes. Next question?

What goes up when tech goes down?

What should you do about it? What goes up when tech goes down? Is there an asset class negatively correlated to equities? One of the results of massive central bank intervention in financial markets is that nearly all asset classes were positively correlated, headed in the same direction (up) at the same time.

Stocks, bonds, real estate, commodities…wait. Commodities? Well, they have been the underperformer lately. The liquidity enabled by central bankers has flowed into growth and momentum stocks. But bulk materials, oil, energy…they’ve been left in the cold. Symbolically, Exxon Mobil — once the largest company in the US by market capitalisation and the oldest member of the Dow Jones Industrials Index — was unceremoniously dropped from the index. Why?

Because in the bright green economy of the future, all our cars will be electric or battery powered and all our light and power will come from renewable energy, right? Well, that’s the story you’re being told. But that story is mostly a fraud, perpetrated by idiots or, worse, people deliberately trying to set human progress back several centuries to where we’re all dark, cold, and hungry.

But that topic is beyond the scope of today’s Rebellion. The pertinent investment question is if oil and energy will make a rebound as tech crashes. Such a rebound might come from a demand shock (China entering the World Trade Organization in 2000 was a huge catalyst for the demand for all commodities, but especially oil). It could also be a supply shock (war in Iran, revolution in Saudi Arabia etc).

An age of failed tech dreams

Or, even with a global depression/recession, it could come as we enter an age of failed tech dreams. The popping of bubbles is more than just a financial event. It’s a change in psychology. As the scales fall from naïve eyes, we see things more clearly. Sometimes the things we see are ugly. But at least we’re seeing them for what they really are.

Which brings me to the insufferable tyrant, Victoria’s Premier, Daniel Andrews. Has there ever been an Australian politician whose done more damage to the physical and mental welfare of ordinary Australians? Andrews announced he was extending Melbourne’s world-leading draconian lockdown by two weeks, until 28 September.

Then, in his latest abuse of logic, law, and language, he said it was ‘selfish’ and ‘unlawful’ to protest his government’s attacks on individual liberty, freedom of associating, and the Rule of Law itself. He was referring to the march on Saturday where hundreds of patriotic Australians marched to the Shine of Remembrance and Albert Park Lake in protest of what has become of free and civil society in Australia.

When will the Australian people rebel

Andrews continues to parade numbers about daily infections. He says government policy is run by science and health experts. And where once the lock downs were designed to ‘flatten the curve’ so the health system wasn’t overwhelmed by a wave of sick people, it’s now being suggested the lockdowns can’t be fully eased until the virus is totally eradicated.

Go ahead and try that. You’ll kill the economy, too. And ‘the economy’ is not an inanimate object. It is the dreams, labours, and creations of million of individuals. Only in the fevered dreams of a man whose spent his whole life studying the use of power to get what he wants does it make sense to crush the voluntary, consensual arrangements of ordinary Australians.

Andrews has gone from unhinged to extremely dangerous. New cases are not deaths. The hospitals are not overrun. Instead of focusing on those most vulnerable the virus — the elderly — he’s seized a once-in-a-lifetime chance to fundamentally reorganise free society with government and ‘experts’ at the centre of all private and commercial relationships.

It’s a frame of mind that would be recognised in and approved in St Petersburg in 1917…or Beijing in 2020. But the almost overnight creation of a police state in a previously free country would have been unthinkable a year ago. How did it happen?

It happened because there are a lot more ‘complicity theorists’ out there than we could have imagined. People who believe what they’re told, that restrictions on their freedom are for their own good, and that the government is really here to help you. Do you still believe that?

The real conspiracy is among the media, the ‘experts’, the psychopaths in government obsessed with accumulating power. They’ve conspired to reorganise Australian society along authoritarian lines. And they’ve managed to do it without a mandate or even an election. It’s an ideological coup carried out in plain sight.

The only way they could do this is by telling a story that scared the Australian people into submission. And then not allowing anyone to question that story. Or even breaking down doors and arresting people for what they write on the Internet). There is a bull market in fear in Australia. When it pops, the cops, the ‘experts’ and the politicians (not to mention the mainstream media) will have a lot to answer for. The question is, when will the Australian people rebel? And how?

More on that next week.


Dan Denning Signature

Dan Denning,
Editor, The Rum Rebellion

Dan Denning is the co-author of The Bonner-Denning Letter.

Dan was a founder of Port Phillip Publishing back in 2005, which quickly became the leading publisher of its kind for independent financial research and insights. In 2014 he left to head up Southbank Investment Research in the UK. Dan is also the author of the 2005 book, The Bull Hunter. Today, he’s based in his home state of Colorado. Each Monday in The Rum Rebellion you’ll get Dan’s unique contrarian thinking to provide insights you won’t find anywhere else.

Dan Denning’s belief in free markets, sound money, personal liberty, and small government have underpinned everything he’s done during his 23 years in the financial publishing industry.

The Rum Rebellion