“We have every confidence in the ability of [person about to be sacked]”

It happens all the time, particularly in sport. Confidence needs to be reinforced which means, it’s gone.
Fiat currency is a confidence game too. You cannot redeem it for gold any longer and when confidence goes, the stampede for the exit crushes everyone. We have seen it in Venezuela, Lebanon, Iran, Argentina and currently in Turkey. People simply assess that they cannot hold the weakened currency any longer, knowing it will not retain its value.

So, when a listed US company decides to reduce its USD Treasury holdings by half and replace it with bitcoin, it means confidence is fading. Here is the CEO of Microstrategy explaining their 50% treasury allocation to bitcoin.

“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders,” said Michael J. Saylor, CEO, MicroStrategy Incorporated. “This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.

Mr. Saylor continued, “MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”

This time you are hearing it from a US corporate who just put $250m behind their opinion. Accordingly, I have nothing to add.

1.  Unemployment insurance
This was reduced to $400 per week from $600 per week using existing Federal Funds. This will last until December 6th (exactly one month after the election)

2. Payroll tax deferral

Employers no longer need to collect the payroll tax deductions from employees from August 1st to the end of the year (exactly one month after the election).
It will be collected at a “later date”.

3. Eviction Crisis

4. Student loans

Whoever wins in November is hardly going to sit back and try and trade their way out of this. If Joe Biden remembers to turn up, he has already discussed a plan for student loan forgiveness. If Trump wins, what has he to lose by doing the same? Outstanding student loans in the US are about $1.4 trillion, the Americans are already in hock for $26.5 trillion, what difference is $28 trillion?

Will a new President really ask for the payroll tax money back in January 2021, right after inauguration?

We can return to this at the end of 2021. I would guess at US debt in excess of $30 trillion by then. It really doesn’t matter though because the debts are denominated in USD and they own the printer and they will print them.

In Australia too, the frenzied borrowing continues. Far from being facetious, it is indeed great news for many many people who are out of work. If you were the government you would have no option but to do the same.

But when will the great news end? When will the borrowing and printing stop? The answer is it will not and everyone needs to be positioned accordingly.

Compared to the US there is almost zero political debate about these sweeping changes. Anybody remember Anthony Albanese? Yes, he is the official leader of the opposition, a position for which he receives a salary of $390,000 a year. In return for that, the deal is he holds the government to account and challenges policy. You know the kind of thing……… “How will you pay for this?” ……”Why don’t you try this?”……… “You should have known that”.

It’s actually an easy job because you never have to deliver on your rhetoric while in opposition, you make life hard for the incumbents by using the benefit of perfect hindsight. Its simple, yet he has been totally absent all year.

Concerned he may have passed away unnoticed, I googled him. The top search result was 4 weeks old.

I assume that’s why we don’t hear from him much because he doesn’t have anything to say other than “carry on”.

The taps were meant to be turned off in September this year, that isn’t happening. They will be on for 12 months at least before the taper begins.

When the bill lands in 2025 or so, the Millennial generation will make up 75% of the global workforce. Since there are fewer of them and the debt burden will be so much higher, will they tolerate 60% income taxes to pick up the tab? I’m going with no they won’t. In which case be careful just how many bonds you buy.

Charts

I’m not sure I believe in chart patterns. You can make a chart say anything you want by throwing some lines around a carefully chosen time period. Perhaps the longer the time period, the more compelling the chart, so at least the following analysis has that going for it.

For me, if more people buy than are willing to sell then the price of something goes up and the chart will say that, but only retrospectively.

Anyway, some of you like charts, so here you go courtesy of Raoul Pal of RealVision.