Fox Business/Angelica Stabile
Billionaire: Biden inherits US economy ‘in the late stage of an epic bubble’
President Joe Biden will oversee an economy that is “in the late stage of an epic bubble,” billionaire real estate developer Jeff Greene told “The Claman Countdown” Wednesday.
Greene argued that the economy’s growth had been “fueled by extreme overvaluations, explosive price increases, absolutely frenzied issuance with these SPACs and IPOs and hysterical price speculation.
“This bubble is at some point going to pop.”
When that happens, Greene added, Biden will have to hurry along the road to recovery.
“It’s going to be a very tough balancing act between the right amounts of federal fiscal stimulus [and] targeted fiscal stimulus,” he said. “But at some point, we have to keep this on track.”
recovery from the coronavirus pandemic while the Federal Reserve simultaneously keeps interest rates at 0%.
“It’s important that President Biden and his team keep an eye on the road ahead and be ready to make changes as needed,” he said.
A progressive Democrat, Greene explained that former President Donald Trump failed to support the working class by increasing wages and establishing income equality – a task he said Biden is sure to carry out.
The stock market’s rally to a record on stimulus and vaccine hopes leaves little room for error
With the Biden inauguration — and the risk of disruption — now over, what’s next for markets?
The S&P 500 has risen 15% since the Nov. 3 election to historic highs on a series of macroeconomic hopes that have driven sentiment, technical levels, and earnings expectations to very elevated levels.
The good news: So far, those hopes are coming to fruition.
The bad news: The stock market has run up big and there is very little room for error.
The bedrock of the market rally to historic highs is the trifecta of additional stimulus to get through the Covid winter, a smooth and effective vaccine rollout, and a significant second half reopening of the U.S. economy (the so-called “reflation trade”).
With markets at these dizzying heights, everything must go right, but pitfalls are everywhere. President Joe Biden may fail to get a stimulus program large enough to please the markets. The vaccine rollout may falter. New strains may emerge resistant to the vaccine. The recovery may prove to take much longer than anticipated, with unanticipated pockets of weakness.
“Right now, the whole reflation, stimulus, and vaccine story remains intact,” Alec Young, Chief Investment Officer at Tactical Alpha, told me. “But any change in that narrative will cause stocks to falter.”
The stock market frenzy feels like 1999 dot-com bubble, global investor Barry Sternlicht warns
Billionaire global investor Barry Sternlicht said Thursday he’s concerned about the long-term viability of current conditions in the stock market, warning that some aspects feel reminiscent of the dot-com bubble in the 1990s.
“I don’t think we’re having a problem in the stock market near term,” Sternlicht said on “Squawk Box.” “The stimulus is too big.”
After the market plunged due to Covid fears in February and March of last year, the Federal Reserve slashed interest rates to near zero and unleashed other programs to support the financial system. Congress also pushed through two massive stimulus packages in 2020, with Wall Street hoping for another one this year.
As of Wednesday’s close, the Nasdaq was up more than 100% since its pandemic-driven low on March 23. The S&P 500 was up about 75% in that same span. The Nasdaq, the S&P 500 and the Dow Jones Industrial Average all closed at record highs Wednesday as President Joe Biden took office.
However, the Starwood Capital CEO urged investors to watch out “come the back half of this year,” citing worrisome characteristics such as investors who appear to be leaning on social media sites for stock ideas and contributing to short squeezes. It’s a development that CNBC’s Jim Cramer also has spoken about, including recently in response to the surge in GameStop shares.
“The dark underside of this market is kids — and I don’t know if they’re kids, we just call them kids because we think they’re less experienced — staying at home and day trading and buying stocks,” Sternlicht said. “I keep reminding my youngins, ‘Kids, one thing about getting older is you’ve seen it all before.’ … It feels a lot like 1999 to me.”
Highly speculative internet stocks helped propel the tech-dominated Nasdaq up more than 500% from 1995 until the bubble burst in March 2000. The index had traded above 5,000 before it then tumbled by nearly 80% to a multidecade low of 1,108 in October 2002.
Polarized U.S., delayed recovery, inflation: Gold price to ‘maintain high prices’ in 2021 – StoneX
Gold remains an attractive investment this year as people opt for inflation-hedge options amid a myriad of risks, including a still divided U.S., according to StoneX.
“The precious metals sector was the best performing commodity group in 2020, rising on average by 27% Y/Y, led by silver, which in turn mirrored gold’s movements as the latter benefited significantly from its characteristics as a hedge against multiple forms of risk,” StoneX said in its 2021 outlook. “This year, with both geopolitical and economical certainty skewed to the downside, we expect that gold will maintain high prices, especially given negative real interest rates and excess liquidity seeking a home.”
Bullish factors for gold in 2021 include massive global stimulus, accelerating inflation risk, low real interest rates, geopolitical uncertainty, and a still divided U.S., the report highlighted.
“The United States, the European Central Bank, and the Bank of Japan have all been active with combined asset growth of over $7 trillion last year. With Congress’ approval of a $900 billion virus relief package in the United States (tied to the $1.3 trillion government funding programme) there is more liquidity coming; Europe may follow suit, while Japan is looking to extend support for the corporate sector,” StoneX said.
On top of that, investors will see that a vaccine is not a cure for all the economic hurdles the U.S. and the rest of the world will have to overcome this year, the report pointed out.