2021 Outlook: The “2020 Won” Dystopia
The top three words readers of the Washington Post had to say about 2020 are “exhausting, lost and chaotic” but the winning phrase that sums up 2020 is by a 9-year-old.
Source: The Washington Post
It is an ironic antithesis to Theodore Woodward’s famous medical aphorism, “When you hear hoofbeats behind you, don’t expect to see a zebra,” taking Occam’s razor to exotic medical diagnosis (Zebra = Covid-19) against more common explanations which would not have worked 2020.
The Everything Chart of 2020
Nearly every single chart of 2020 would look like the above, in a total disconnect with the pandemic and lockdowns that devastated thousands of small businesses while enriching others disproportionately. Tik Tok and Discord have become the new trading desks of millennials and Gen Z, minting millionaires who buy “stonks,” day-trading stocks on predictions made from Scrabble tiles on gamified platforms like Robinhood and shares of bankrupted companies continue rally even after shareholders are told they will get nothing because the kids on TikTok call trading, “passive income.”
Best viral cartoon for the fastest bear market ever in history, falling 35 per cent from a record high in February and taking just 126 trading days to make a new record high.
The alternate reality has never been so stark as we read about folks and businesses in trouble and watch videos of grown men fighting each other to buy a used Porsche as we are gripped with the YOLO fever after a lockdown turning us into FOMO zombies.
2020 ended with contractions and recessions in 93 per cent of the economies in the world and stock markets at all-time highs. This time last year, CEO’s were right and wrong in calling for a recession and a top in stock markets, which cannot be more confounding or absurd.
And as far as we are concerned, 2021 has not started yet because it is just more of 2020 so far and we feel more foolish by the day ruing that January is not even over yet.
Yes, we started 2021 with the usual plane crash in Indonesia instead of Iran; Jack Ma disappearing; mass arrests in Hong Kong; riots in the US Capitol; the second impeachment of a U.S. president; Bitcoin topping US$40,000; Elon Musk becoming the richest man on the planet; and Kim Kardashian divorcing Kayne West.
The best insults to any form of intelligent thinking that failed miserably in 2020 would be the listing of a SPAC (special purpose acquisition company) with LMAO as a ticker in the first weeks of 2021 and Elon Musk sending a stock price up 6,350 per cent even when it is the wrong Signal company after he sent Dogecoin soaring in another tweet.
Do not worry for Mad Max did not take place in 2021, the following viral meme is false.
Pulling out the checklist for 2021 predictions below, we find that two weeks into 2021, Morgan Stanley and gang have already changed their minds about the weak USD call, which justifies our personal reasons for keeping an open mind about markets in 2021—given a large number of moving parts involved which makes it imprudent to formulate any fixed views.
Source: Visual Capitalist
It is complicated with the change of political regime in the U.S., which will shape the future of globalisation, along with a mutating virus and the dubiosity of certain vaccines that will start to show up in the months ahead. Debt moratoriums will end soon and new stimulus will be rolled out as political fracas continues in the U.S. amid a fractured and polarised society. Our imaginations are already sorely challenged by the ability of central banks to pull more rabbits out of the hat after their feats last year that reek of moral hazard.
And thus, we shall now stop our gripes and present the key themes we are sure of for 2021, and all bets are off if Nostradamus was right about the comet hitting earth or solar storms or a zombie apocalypse (how did they know about zombies 500 years ago?).
The Great Reset and everything you need to know about it
Justin Trudeau brought it up at a U.N. speech in November, sparking a conspiracy theory that the world was gearing towards a totalitarian “Big Brother” New World Order. But the Great Reset is simply a “Build Back Better” ideology that politicians around the world including Singapore are embracing, reducing inequality and addressing climate and environmental issues for a sustainable future.
U.S. President-elect Joe Biden is kicking start with a US$15 minimum wage (with good intentions), which may not help the job losses due to the pandemic lockdowns from the charts below evidencing much more jobs lost in the lowest-earning brackets during Covid-recession than prior recessions. It will nonetheless be a trend going forward along with student loan forgiveness and left-leaning policies for the disadvantaged folks and small businesses while overhauling the tax system to raise taxes on the rich, capital gains, corporate taxes and go after the global tech companies.
Other governments are picking up on the initiative as well, vowing to curb inequality and their environmental footprint, which has led to a spike in copper and silver prices due to a shift to renewable energy and electric cars.
It is altogether a simply noble cause for a happy-ever-after equitable world for the kids, but it remains to be seen.
YOLO, the population is in decline
You Only Live Once, there is even a YOLO credit card.
There is a global crash in having babies or a global baby bust. Ironic because pet ownership is on the rise as we hear puppy prices have doubled or more, along with Bitcoin as Bloomberg pointed out (except that you cannot take profit on the pup), with Corgis going at S$14k in Singapore (we personally know a half-dozen people who bought a dog or two in the last 6 months). Plus we see queues lining outside the veterinarian clinic while the GP is forlornly empty.
We read that Japan’s birthrate is declining fast, the U.S. is seeing the slowest 10-year increase in its population since the 1790s, Taiwan’s and South Korea’s populations shrank for the first time ever such that South Korean students are “forced to date” as the desperate government attempts to lift their birth rate and China is set to lose its place as the most populous country in the world in just two and half years.
Globally, Millennials and Gen Z-ers are rethinking having children because of climate change and uncertain gig economy finances.
Face it, pets do not pay taxes, babies will! And pets cannot afford to buy all the expensive real estate we are building for non-existent babies.
Antitrust and Regulation
It will just keep coming especially with all those sites and apps booting Donald Trump off, making the world realise just how Cancel Culture can be effected at the whims of populist demands. Tech oligarchs are entering politics and the realm of “thought control” which has alarmed politicians around the world, including India, and bringing up the need for regulation as opposed to “self-regulation.” AOC (Alexandria Ocasio-Cortez) just proclaimed this weekend in reference to the riots in the Capitol that “Mark Zuckerberg and Facebook bear partial responsibility for Wednesday’s events. Period.” Watch this space.
We have devoted an entire article, “To Trust or to Anti-Trust,” to how the world is propelling towards singularity with just a handful of shopping platforms, car companies, apps, social media and regulators wising up after these years with France just vetoing the takeover of Carrefour by Canada’s Couche-Tard, and Google’s takeover of Fitbit under intense regulatory scrutiny. There is just something insidious about Google knowing your whereabouts and heart rate at the same time, even if the world is pivoting to data nihilism after countless breaches of personal information that has left us numb, helpless and vulnerable or safe? Because the FBI just announced that they have the GPS coordinates of every cellphone at the Capitol protest and they will be coming for every single rioter eventually.
Being digital hostages and unable to live without the online economy, social platforms and WiFi is draining to the soul especially when we read about the major outage in New York late November that left folks unable to operate their vacuum cleaners and door locks because AWS went down. We are living in the age of Alexa. Imagine being locked out or unable to vacuum or play Pokémon Go because everything now depends on Amazon?
The Chinese government has set the unusual precedence in the antitrust arena, going ballistic on an antitrust and data protection drive, recently releasing draft rules to regulate its biggest technology firms.
Watch this space too.
Central Bank Digital Currencies and Bitcoin Regulation
It took just 17 days for Bitcoin to break US$30k after crossing US$20k and then it went from US$32k to US$34k in less than 45 minutes on 2 January before topping US$34k the next day and we just saw US$40k on Thursday.
“Have Fun Staying Poor (HFSP)” is the Bitcoin meme that has gone quite viral as the Bitcoin and Tesla cultists have their last laugh yet.
What is Bitcoin? Dogecoin? Tether? Ethereum? And all the rest including Ripple which is currently being sued by the SEC because the company owns 55 billion of the total 100 billion XRP tokens in existence with a market cap of more than US$20 billion pre-lawsuit.
It still takes some getting used to because Bitcoin and Co. are just invisible stores of the value of fiat currencies that appeared out of nowhere to be valued more than cash, which has created some immense wealth (every $1 invested in Bitcoin in July 2010 is worth $800,000 today) although these X-coins are not backed by any sovereign. In other words, they exist on the faiths of the buyers or as Mark Cuban described, “more religion than solution,” confounding the old folks who are in charge and tolerated as a constitutional right for free markets.
Just imagine a work of art that people would pay more than the cost of the paint, canvass and time it took to produce? And just imagine it is invisible too? Just like paper Gold which is not the real thing? Or maybe it is easier to imagine it as a pair of Air Jordan’s?
Out springs the Bahamas “Sand Dollar” which is issued by the Bahamian central bank and the first insurance policy in China to be paid in digital yuan as Japan, Turkey and the Eurozone amongst other sovereignties prepare for their own digital currencies.
And all of a sudden, the war on Bitcoin and Co. begins as Indian mulls an 18 per cent GST tax on Bitcoin trades, Bitcoin holders barred from depositing profits in U.K. banks as U.K. regulators warn crypto investors this week they risk losing “all their money.” The U.S. Treasury proposes crackdowns on virtual-currency transfers and, also this week, ECB chief Christian Lagarde called out the “funny business” in Bitcoin for global regulation, echoing the G7 sentiments in December even as China has been cracking down on crypto exchanges in the last quarter of 2020.
The old people are wising up although we know that it is just as hard for them to make sense of the economic, philosophical and political underpinnings of crypto just as Amazon and Co. will have the better brains on their side when arguing their case for antitrust.
You don’t get rich working in regulations by the way.
Tesla has minted too many millionaires to be granted cult status and for Elon Musk to move stock prices of similarly named companies, crypto and even a Japanese toy and game maker with a tweet.
We will not critique Tesla but we found the best picture that speaks a thousand words as Tesla reaches a P/E of 1675.
Source: Seeking Alpha
Water, Weather, Inflation
For the deluge of rainwater Singapore was bestowed in the first weeks of January, a water crisis has been in the works for the past decades that somehow financiers managed to monetise water in creating a Water futures contract based off California Spot Water market. Who owns water anyway?
In Singapore, it was illegal to harvest water even if it lands on your property in the past. Whilst we will not speculate, there is a chance that water has already become a political issue which is something Singaporeans are not unfamiliar with as China holds back water on her Mekong neighbours, affecting Cambodia, Laos, Thailand, Vietnam.
It is not just water but food security that is a concern for many countries after the pandemic led to shutdowns, which created disruptions in food supply and the world has suddenly found global food prices are at a six-year high. This has led to social unrests in some parts of the world as the United Nations Food and Agriculture Organisation’s Food Price Index is up 18 per cent since May 2020, boosted by adverse weather, supply chain and labour disruptions and stockpiling.
Poor harvests? Singapore markets’ fish and vegetable prices are up this week, as weather conditions in neighbour Malaysia led to shortages as corn, soy beans and wheat prices are at their highest since 2013.
2020 Commodity Returns: Lumber: +81%; Silver: +45%; Soybeans: +32%; Copper: +27%; Gold: +23%; Palladium: +23%;;Natural Gas: +18%; Corn: +15%; Wheat: +13%; Cotton: +8%; Sugar: +8%; Platinum: +4%; Cocoa: -0.2%; Coffee: -4%; Gasoline: -19%; WTI Crude: -21%; Brent Crude -24%; Heating Oil: -26%.
Commodity prices move in long cycles as with technological innovation cycles, known as K-waves or Kondratieff waves after Nikolai Kondratieff, typically lasting a decade or two. The good news is that the central banks will be getting all the inflation they want, while the bad news is that the risk to the rest of the markets may be too hard to bear that we would not even want to whisper the word “inflation” because we would not vouch to be weather experts as well.
Watch this space.
A Final Word
We have not even scratched the surface of what to expect for 2021, but we dare not offer a view on the bond markets and the debt situation that we hope will go away nor dare even wish for a market crash because experts have been wrong since last July; and nor will we comment on the social fissures around the world and how they will play out or give an opinion on the extreme greed in the retail trading and much more. The central banks around the world have created a moral hazard in markets, but we do not even want to imagine or worry about that right now.
Opinions are pure fluff at this juncture and 2021 is turning out to be as dystopian as Mad Max even if the film was not set in 2021.
Will we look back this time next year and say, 2021 = 2020 won? Yet it still looks like the world is rushing in without expecting submarines and zebras as they did in 2020.