In the dazzle of the Mag 7’s soaring earnings, a hidden truth emerges. For the 384 out of 1,946 companies comprising the Russell 2000, Q4 earnings reveal a shocking -53% QoQ growth. Is the market poised for something far more ominous than we think?
It’s not just a concern for investors; it’s a national security issue. The capital markets’ inability to efficiently allocate capital raises alarms. Equally unsettling is the fact that the equity market cap stands at 185% of GDP, a perilous 40% higher than the Dotcom Bubble Peak.
The question looms: Should Powell be trembling or rejoicing? As Warren Buffett wisely said, “The market can remain irrational longer than you can remain solvent.” The room for further distortion exists, and we’re caught in the midst of it. The chart tells a story, one that might not end well for valuations.
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While everyone is focused on how great earnings are for the Mag 7, & equating this to a strong US economy, for the 384/1946 companies who make up the Russell 2000 that have reported Q4 earnings, QoQ growth is down a jaw-dropping -53%. Maybe… things are about to get REALLY bad. pic.twitter.com/cmHLNfP7db
— Gordon Johnson (@GordonJohnson19) February 2, 2024
It is bad for US national security that capital markets no longer efficiently allocate capital.
It is utterly terrifying that equity market cap is 185% of GDP, or almost 40% higher than the Dotcom Bubble Peak.
— RJR Capital (@RJRCapital) February 2, 2024
“The Markets Can Remain Irrational Longer Than You Can Remain Solvent”
We have more room to go before equity markets realize the damage that has been done to the word named “valuations”.
Well, liquidity can create distortions, and we are in the middle of it.
The chart says it… pic.twitter.com/Py4XIT1bxT
— Wall Street Silver (@WallStreetSilv) February 2, 2024
Should Powell be scared or happy at the moment?
Chart @BeowulfTreasury pic.twitter.com/rlSCpuG8Ga
— Michael A. Arouet (@MichaelAArouet) February 2, 2024