MARKET PERSPECTIVE

By J Mulraj

Feb 17-23, 2024

Biden’s failed policies are destroying it!

On assuming office as President, one of Biden’s first acts was to ban the Keystone Pipeline, a project to transfer, through the pipeline, Canadian crude to US refineries, and to stop further leasing of Federal Land for the purpose of fracking, to produce crude oil from shale.

The Keystone project was stanched in furtherance of ‘woke’ policies, which is being aware of social injustices and discrimination, and for promoting social diversity. The pipeline passed through indigenous lands of Canadian and American aborigines, who objected to the pipeline for fear it would destroy their sacred sites and affect the health of their communities. The discouragement to fracking was for environmental reasons, as fracking uses a lot of water, contaminating underground resources, and can cause earthquakes.

The consequences of these two decisions, stemming from ‘woke’ policies and a singular focus on climate change (now being questioned for its influence over policy decisions) had geo-strategic implications. They converted America from being an energy independent country to, once again, being dependent on OPEC for its energy needs. When primary elections were looming, and high gas (petrol) prices were an electoral issue, Biden had to grovel before Saudi Prince Mohammed Bin Salman, or MBS, (shortly after he had called Saudi Arabia a pariah state), pleading with him to reduce the price of crude oil prior to the mid terms.

MBS not only snubbed Biden with a fist bump, but a month later, he warmly welcomed Xi Jinping, (with a handshake, not a fist bump), and signed a long term deal to supply oil, priced in renminbi. It was a deal brokered by Henry Kissinger after the first oil shock, that global oil was priced in US $, creating an international demand for the greenback. This advantage was lost by Biden, in his foolish decision to discourage fracking, and for the momentary pleasure, defined by wokeness, of calling Saudi Arabia, a long term ally and big buyer of arm, a pariah state (after Jamal Khashoggi was murdered in Turkey’s Saudi Embassy).

A study on how wokeness has adversely affected the US State Department, can be seen here. There are several examples of the insanity of it. A bizarre example was that of a Biden appointed US Ambassador to France, who took off pictures of US Founding fathers hanging on the walls of the Embassy, and replaced them with others, such as a transgender activist, a violent protestor, and a communist, all in the name promoting cultural diversity!

A nation cannot forget the contribution of those who contributed to its history!

Another example of the folly of such woke promotion of cultural diversity, perhaps, is the craziness of Biden’s open border policy. The height of woke craziness was reached, last week, when New York Mayor, Eric Adams, announced a program, under which migrants would be given $10000  of taxpayer money, with no ID check, no restrictions, and no fraud control! Can no one see how such foolishness is helping cause a $34 trillion of unrepayable debt, and is driving America to financial ruin?

Isn’t it past time America WOKE up?

Amongst such asinine policies, what keeps America afloat? For one, it’s amazing innovation. For another, it’s venture fund industry, willing to fund start ups with innovative ideas. For a third, a vibrant capital market that allows the start up founders to become very wealthy, not just through inheritance. It leads to companies like chipmaker Nvidia, whose stock appreciated 16% in one day, or by $ 277 billion, in one day! That’s a one day gain larger than the market cap of RIL!

Not only the US, but the leadership of China is also destroying its economy. Earlier it was China’s one child policy, which, over decades, has turned its demographic profile to an irreversible downward trajectory. Then it was several of Xi Jinping’s policies, starting with the zero tolerance to Covid. The country was locked in, to the detriment of its reliability as a global supplier of manufactured goods. This has resulted in an exodus of foreign manufacturers, thus to high youth unemployment. The loss of wage income has tightened consumer spends, thus to the lowest GDP growth figures for decades. Thus to the recent crash in its stock markets.

The crash of its stock markets was preceded by a crash of its realty sector. This sector had behaved like a giant Ponzi scheme, in which realty firms like Evergrande, now forced into liquidation by a court in HK, sold apartments, and collected cash, long before construction had started. Subsequent buyers paid for completing previous projects, like any Ponzi. Now the music has stopped and the realty sector, which contributed 30% to China’s GDP, is largely bankrupt.  The inventory of unsold apartments will take years to sell.

Xi aims to transition to an economy dominated by high end manufacture, and cutting edge technologies. The question is, how will citizens survive in the interim?

Europe, too, has been let down by its leadership. They unthinkingly followed Biden’s lead in confronting Russia. Forgetting the simple fact that Europe was reliant on cheap  Russian oil and gas. America wasn’t! Three years later European countries are slipping into recession. Germany entered recession, last week. So did Japan.

About 150 years ago, Abraham Lincoln described democracy as being of the people, bye the people and for the people.

Sadly, today, as described above, it has morphed into off the people, bye the people and floor the people.

The BSE Sensex closed the week at  73142, up 284.

What should investors look out for?

It’s election time in India, in May 2024, and in USA in Nov 2024. One is not including Russia, March 2024; it’s only opposition candidate, Alexie Novolny,  has been killed in prison. In India, the ruling party is widely expected to win, so policy should remain unchanged. In America it’s likely going to be a race between Biden and Trump, who just won the primary in New Hampshire. A change in leadership after the November election will result in lots of policy changes, starting with energy.

The US Fed maintained interest rates. The stock market had expected a rate cut thanks to low inflation and high employment.

The higher (by 5%) interest rates has stressed the commercial real estate (CRE) sector, which comprises rental offices and small shops. CRE building owners are struggling to refinance mortgages, and finding tenants to give them a high enough rent to make it viable to rent after a 5% interest rate increase. One can expect more bank failures, like Silicon Valley Bank, unless interest rates come sharply down soon.

Picture Source: https://www.boldsky.com/health/wellness/benefits-of-waking-up-early-in-the-morning-129905.html

Comments may be sent to jmulraj@asiaconverge.com