16 lines
2.4 KiB
JSON
16 lines
2.4 KiB
JSON
{
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"HubID": "3767",
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"Date": "1/14/2024",
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"HubTags": [
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"External Platform Posts",
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"Future Map Changelog",
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"Future Map Forward Guidance"
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],
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"Contacts": "",
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"Companies": "",
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"File": "",
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"Image": "",
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"Summary": "<p>Liquidity in forms of cash injected by the Fed and low interest rates are the main driver of equity prices over the last few decades, rather than stock performance driving equity prices. </p><p>The top 1% hold 54% of equities, and the broader top 10% hold 92% of equities. Swings in equity value matter greatly for people who have most of the country’s wealth, and affect their spending, investing, tax payments, and other things.<br /></p><p>As a result of these and other factors, U.S. tax receipts tend to be highly correlated with year-over-year stock performance. This fact creates a feedback mechanism where downward or stagnant equity prices contribute to larger fiscal deficits, and those larger fiscal deficits can be stimulating to the equity market and the economy, and help pump those equity prices back up or at least prevent them from falling as much as bears might expect. And that feedback mechanism grows stronger over time as debts and deficits grow, and as the stock market is larger relative to GDP. Thirty years ago, the U.S. stock market was valued at about 70% of U.S. GDP whereas today it is valued at about 170% of GDP.<br /></p><p>Outcome: The summary is that monetary and fiscal policy is now the main driver of equity prices, which then feeds into economic performance and tax receipts. At some point, monetary and fiscal policies through ever growing cash and debt loads will no longer be an option, which means equity prices fall and/or crash, which means economic performance crashes, and thus tax receipts also crash, all creating a vicious cycle.<br /></p><p>I added this as a new slide to the Business Cycles slideshare. </p>",
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"Notes": "<p><img class=\"aligncenter size-full wp-image-19524\" src=\"https://www.lynalden.com/wp-content/uploads/january-2024-newsletter-equity-share.png\" alt=\"Top 10% Equity Share\" width=\"718\" height=\"450\" /><br /></p><p style=\"color:rgb(34, 34, 34);font-size:18px;background-color:rgb(255, 255, 255)\"><img class=\"aligncenter size-full wp-image-19527\" src=\"https://www.lynalden.com/wp-content/uploads/january-2024-newsletter-stocks-vs-taxes.png\" alt=\"Stocks vs Taxes\" width=\"718\" height=\"450\" /></p>"
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}
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