Last night, Thursday, March 11, 2021, President Joe Biden signed into law the massive $1.9 trillion Covid relief bill, which includes $1400 checks for most Americans. The principal beneficiary of this bill will be Elon Musk because the proceeds from those $1400 checks will go to the same place the proceeds of the earlier $600 checks went, investments in shares of Tesla. Some of the proceeds may also find their way to the shares of GameStop.
I mulled this fact with my first coffee of the morning while observing that the stock market is at an all-time high and thought, the world is going crazy. Nothing makes any sense anymore. Tesla shares are trading at a price/earnings ratio of over 1,000 making Mr. Musk the second richest person on Earth. Of course, he had been the richest when Tesla shares were trading at $880 a share, but now they are trading at only around $670 a share, giving the company a market capitalization of $660 billion, roughly equivalent to all the other motor car companies combined.
If you think Tesla’s roller coaster stock prices are crazy, take a look at GameStop. GameStop is a brick and mortar retailer of video games that was well on the way to becoming the next Blockbuster. Hedge funds were shorting shares of GameStop left and right (selling shares they didn’t own) in the hopes that the stock, which was languishing at around $10 a share as recently as September 2020, would go even lower. But a bunch of retail stock investors that were members of a WallStreetBets forum on Reddit decided to try and push the stock higher. This is called a short squeeze because the short sellers had to cover the stock they had sold at much higher prices than their short sale price. Prices of GameStop spiked to $325 a share as the hedge funds scrambled to find shares to cover their losses.
But that’s not the crazy part. The hedge funds lost billions of dollars unwinding their short positions and some went bankrupt. The shares of GameStop came back down to around $100, which was ten times higher than it had been at before the short squeeze. Now the stock is at around $200, which is crazy. GameStop has a market capitalization of around $20 billion at these prices even though it only has about $3 billion in assets. And it doesn’t have a price/earnings ratio because it doesn’t have any earnings. It has lost money for the last two years. GameStop is still the next Blockbuster (for you youngsters Blockbuster was a company that rented physical DVDs of movies from brick and mortar stores before being driven out of business by Netflix). If you own any GameStop shares, sell them now.
It is not just these two weird stocks that are aberrations. The price/earnings ratio for the entire Dow Jones Industrial Index has increased to 32.86 as I write from 18.31 a year ago. It is true that P/E ratios spike coming out of a recession because stock prices are forward looking, and P/E ratios are backward looking. But the Covid recession was not driven by economic forces but by the pandemic and most analysts are predicting a modest recovery as consumers hold back on going out to restaurants and flying somewhere on vacation. And this modest recovery will be flying against the winds of higher taxes and more regulation promised by the Biden administration. I have trimmed my equity portfolio substantially.
I wish this craziness was limited to financial markets. We have seen market bubbles many times in the past and, although the pain they can cause can be intense as it was during the Great Recession in 2008, we have always been able to bounce back. But this crazy shit is happening all across our country.
First there is all of this anti-racism and critical race theory nonsense. Government and business are both turning their focus on diversity, equity and inclusion at all costs and losing sight of everything else in society. Instead of trying to bring minorities up, they are intent on dragging everyone else down. They are promoting the false narrative of the 1619 Project as history in our public schools. They want to “dismantle racism in mathematics instruction” by deemphasizing the “right” answer, urging group collaboration instead of individual competence, and saying that the ability to explain how you got the right answer is acting “white.” I’m not going to be flying in any plane designed by these folks.
Then there is this surging acceptance of socialism and the belief that socialism is better than capitalism. They always say they believe in science, but they are blind to the empirical evidence that socialism doesn’t work. They think that if you take away the profit motive you will get the same great products and services at a lower price, not realizing that they will not get great products and services but shoddy goods and rotten service.
Let’s not forget the cancel culture cancelling Dr. Seuss. I checked the book they want banned and admit it did contain a rather goofy depiction of a Chinese person, but it also contained a lot of goofy depictions of white people as well. Everybody in the book looked goofy. If we keep expanding safe spaces where nobody is offended, we will end up in a barren lifeless world.
And then I read a Gallup poll that said that 15.9% of Gen Z kids (born between 1997-2002) identify as LGTB compared to only 2.0% of Baby Boomers (born 1946-1964) in a recent survey. If that is not a sign of mass hysteria, I don’t know what is. The biology of human beings cannot have changed that much. And I am sure that if the poll were taken worldwide Gallup would have gotten very different results. It seems that Americans are turning into lemmings and getting ready to jump off the proverbial cliff.
If you think that is the extent of the craziness in America, think again. I am just getting started. The craziness extends to all frequencies of the political spectrum.
From financial market bubbles, to progressive left looniness, we arrive at right-wing conspiracy theories. The most prominent is the QAnon conspiracy created by an unknown person (or persons) that posts unproven and unprovable assertions and conspiracies on the Internet. The thing about conspiracies is that once they get beyond a handful of people, they are no longer conspiracies and if there really was a worldwide secret cabal of Satan-worshipping, cannibalistic pedophiles there would be plenty of evidence of its existence. QAnon followers believe that ex-President Donald Trump is some kind of messiah that is going to save the United States. QAnon followers are believed to have been at the core of the January 6th insurrection that turned violent and led to five deaths.
And Donald Trump had to be forced to denounce the violence that occurred in his name. He supported loyalty to Donald Trump over American ideals and principles. Many Republicans are declaring that the GOP is now the party of Trump. This burgeoning personality cult is reminiscent of pervious cults that fawned over leaders like Hugo Chavez, Kim Jong-un, Juan Peron, Benito Mussolini, Mao Zedong, Josef Stalin, etc. etc., etc. Personality cults do not turn out well for anybody – even their most ardent followers are at great risk.
Add in bitcoin, a digital currency created by an unknown person (or persons) that used the name Satoshi Nakamoto and that consumes prodigious amount of energy in order to be “mined,” that has risen in the financial markets to $54,000 per coin. Include a digital image (called a non-fungible token or NFT) created by an unknown but actual artist named Beeple that sold for $69.3 million at Christie’s making him the third most expensive living artist on the planet. Add in the fact that our international rivals are not only laughing their asses off at our stupidity and gullibility, they are also likely stoking the fire by hacking our accounts, posting anonymous memes and other shenanigans to drive us batty.
I feel like I want to grab the American people by their collective collars, slap their collective faces and shout, “Wake up, wake up, you fools, it is just a nightmare.” But all these bizarre events present a real danger and will cost real lives. America is in real danger. You need to stand up to all this craziness and denounce it for what it is. Before it is too late.