In the last 10 years, the US stock market has more than quadrupled.
After enduring the biggest economic slowdown since the Great Depression a decade ago, US stocks rose again to reach unprecedented levels and regain their prestige.
To ensure that agitation can not be repeated, new laws and regulations have been implemented, supplanting outdated doctrines that helped undermine the system in the first place. And, from the depths of danger, a new robust economy emerged.
But a Wall Street expert believes that this new economy is like a house of cards, and not the strong bastion that consensus seems to believe.
Vincent Deluard, INTL FCStone's global macro strategy director, is not shy about sharing his thoughts on an economy he sees less representative of reality with each passing day. The genesis of his thinking comes from the very institutions that helped rescue the world from economic disaster: central banks.
More than ten years of easy money splashing into the financial system has permeated far and wide, taking corporate debt levels to levels never seen before. That, in turn, has broken the previous economic concepts that were previously considered resolved.
Now, Deluard is sounding the alarm about the effects and the involuntary consequences of the "falsification of the economy", and the relationships he says began to deteriorate around 2016.
"Companies whose value is not based on physical assets or labor become more desirable: assets that do not appear in financial statements, such as brand name, access to customer data or a user base captives are the value drivers in the era of free capital, "he wrote in a recent note to clients.
Deluard says that the proliferation of these trends has led to a situation in which previously reliable valuation metrics have become irrelevant.
The following table shows the intangible portfolio of Deluard (black line), a strategy that exceeds the actions offered by patents, trademarks and intangible assets, and begins to outperform its tangible portfolio (green line), which is a strategy that exceeds the actions that offer the greatest amount of shares. Tangible assets per dollar invested.
The intangible portfolio begins to outperform the tangible portfolio in 2016, a phenomenon that continues today.
"Owning tangible capital is no longer an advantage when capital is free," said Deluard. "The actions with the best performance are intangible businesses without tangible capital and few workers".
He continued: "Payment networks are more valuable than bank branches, physical stores can not compete with online markets, franchises are worth more than restaurants."
As if Deluard's dissatisfaction was not clear from these pointy quotes, he titled his report "The Fyre Festival Stock Market," evoking the infamous disaster of an ill-planned music festival. And at the heart of their argument is the omnipresent capital described above.
"The distinction between tangible companies whose value is derived from workers and capital, and those that have been separated from physical realities is the summa divisio That will dominate the yields of the actions in the next decade, "he said.
A combination of advanced technology and access to capital that costs nothing has knocked down entry barriers, leaving the unconditional and dominant firms of the past to adapt or die. And the economy of exchange, controlled by the companies that Deluard calls "immaterial", dominates the landscape.
Here are some examples:
- Airbnb, which does not own any property, is currently worth more than the Hilton group.
- Facebook, which does not have content, is one of the most valuable advertising platforms in the world.
- Uber and Lyft, which do not own a single vehicle, are the most valuable taxi companies in the world.
- Tesla, which is worth more than Ford, has less than a quarter of the employees.
All these companies can surpass their predecessors due to the distorted landscape that was caused by free capital. It is almost a disadvantage to have physical space and workers now.
And because traditional valuation metrics become useless because of this new phenomenon, investors now face one of the most paradoxical landscapes in history.
Deluard concludes with a thought-provoking message: "Investors should evaluate if this model of capitalism without capital & # 39; and & # 39; employers without employees & # 39; have gone too far or if all companies eventually they will become irrelevant. "