Your Test Drive of the New World Order

Dear Reader,

Last week I left off with the question of asking when and how the Australian people would rebel against the draconian lockdown rule of various state premiers, especially Beijing’s man in Melbourne, Daniel Andrews. The answer this week is clear. At first reluctantly. And then, hopefully, enthusiastically.

I’ll come back to that in a moment. But first to markets. And the big question: is this the BIG ONE for the momentum market? Has the market lost its mojo? Are stocks about to go from overvalued to undervalued in a hurry again?

Yes, says Barron’s magazine. It’s a bubble. But no, it isn’t over just yet. Hmm.

The magazine says that the forces that have inflated this bubble could keep it going for longer than you expect. Working from home for good, remote learning, the flight from the cities to the country — all these forces support companies like Apple, Amazon, Microsoft and Zoom.

And let’s not forget liquidity and speculation! In the blow-off stages of a mania, all the money (smart, dumb and speculative) is chasing higher highs. Evidence? The volume of trading in single stock options recently exceeded the volume in regular shares for the first time ever, according to Goldman Sachs via the Wall Street Journal.

‘Dark Horse’ Investment for 2020?: Dan Denning believes that silver’s rally is far from over. In fact, now might be the best time to add the precious metal to your investment portfolio. Click here for the full details.

There’s no limit on human stupidity

Don’t get me wrong. There’s nothing wrong with options — if you know what you’re doing with them. But options were originally designed as a way to hedge risk. They were not designed to be the primary way punters got rich off rising tech stocks. But that seems to be where we’re at in this particular cycle.

There’s no hard and fast rule that says it has to be over. There’s no limit on human stupidity. Punters gonna punt. And they’ll keep doing it until a ‘correction’ forces a margin call and wipes them out or renders their options positions expire worthless.

The underlying earnings of these businesses don’t support the valuations. No changes in how people trade those earnings are going to change that. In the meantime, buckle up and enjoy the ride. But please be aware how quickly it can all vanish.

The mainstream press continues to conflate volatility with risk. They’re similar but not entirely the same. Markets ARE risky. They go up. They go down. Moods swing. The social mood changes. It can happen fast.

Here in the US, some strategists think the election will actually make a difference. Morons! All of them. Check the numbers out.

Annual Federal spending has topped $6 trillion for the first time in US history. And in concert, the annual deficit has topped $3 trillion, also a first. The US’ deficit-to-GDP ratio is now 16% and rising.

Whether Joe Biden can beat Donald Trump or not, whoever is in the White House a year from now will be in charge of a political establishment that’s embraced unlimited government and unlimited money. From a political point of view, this is almost impossible to reverse. And for a country with nearly $27 trillion in debt, the only way out is a de facto default: pay it off with inflation.

Inflation may be, as Milton Friedman once said, always and everywhere a monetary phenomenon. But it’s the spark that can set lots of other things on fire. Like civil society. If you think the US is a cauldron of anger and resentment now, wait until food and fuel prices start rising faster. Then you’ll see the kind of monetary regime change you only ever read about in the history books.

Nothing will ever be the same…

Australia is not just a casual observer to all this. It has some skin in the game. If Donald Trump really wants to decouple the US from China, will that force Australia to choose sides? The US is Australia’s military partner and security guarantor. But China is where Australia’s bread is buttered. Can it afford to make any other choice than to go along with Beijing’s New World Order?

Which brings me back to Victoria’s Premier Daniel Andrews. Take a good look around at the Australia you live in. Curfews imposed for no medical reason. Restrictions on work, travel, and freedom of assembly. Cops who talk derisively about citizens exercising their fundamental rights. What do you make of it?

Here’s what I think: this is your test drive of the New World Order in which all private relationships are restricted and mediated by the state. Schools, businesses, churches, even illicit affairs between consenting adults — none of these will ever be the same if Andrews gets his way about the ‘COVID normal’ that will emerge after. Big Brother is licking his lips.

Like a clever debate society boy, Andrews says it’s not a question of human rights but a question of human life, as if that turn of phrase eliminates the psychological, spiritual, physical and financial damage he’s inflicted on millions of Victorians through his arrogance. The media continues to televise and report Andrews’ daily recitation of the number of new cases in Victoria. And we’re told we must accept that unless that number meets the government’s expectations, the economy can’t reopen.

Here’s a memo to you sociopaths in charge: keep it up at this pace and there won’t be an economy to reopen. Small businesses will throw in the towel for good. Commercial renters will walk away from leases. Renters will call for rent to be cancelled. People will stop paying mortgages.

Those are the kinds of unintended consequences you get when you start messing with a complex adaptive system. Free enterprise only works if individuals are free to make their own choices, based on their own preferences and values. Government politicians who’ve never met a payroll in their life or tried to provide a good or a service at a profit are in no position to tell the private sector what it takes to ‘open up’.

They have no idea. They think you get what you want in life through force because that’s how they’ve lived their lives. The rest of us make our way through life by trading our time for money, providing a skill or service other people value. It’s all voluntary. Not compulsory.

There have been 19,835 total cases in Victoria, according to the government’s figures. 17,893 of those cases have recovered. There are 1,157 ‘active’ cases. There have been 723 reported fatalities due to COVID, with 126 people currently in the hospital and nine people in ICU. That’s right. NINE people in ICU. NINE.

People did ‘the right thing’ and complied with restrictions in the lockdown so the health system wouldn’t be overwhelmed. All the evidence indicates it hasn’t been. And all the evidence suggests the vast majority of COVID cases recover from it. These are facts.

Yet instead of trusting the ‘science’, the government ignores these numbers and calls to ‘eradicate’ the virus, even if it means crushing the economy, public morale, and civil liberties in the process. Victoria is now top of the table in the world for incompetent political and medical leadership, and its people are paying the price.

Sooner or later, the few competent journalists in the mainstream media will start asking questions. Honest cops who didn’t sign up to beat up on their neighbours or arrest them for Facebook posts may start calling in sick. And two-faced rat politicians will smell blood in the water and turn on Andrews. It can’t happen soon enough.


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.

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