| By Bill Bonner, Chairman, Bonner & Partners BALTIMORE, MARYLAND – War, inflation, bull markets, bad marriages, eating binges, and benders – all are more fun at the beginning than at the end. And none goes on forever. Yes, Dear Reader. The music is still playing. The dancers are still on the floor. And the barmen at the Federal Reserve are still refilling glasses as fast as they can. But feet are getting sore… drunks are babbling… and the band is getting tired. The recovery began in the first quarter of 2009. And the stock market bottomed out in March 2009. We’re now in the longest business expansion… and the longest bull market… ever. And if the boom ends tomorrow, investors will have no cause for complaint. All they had to do was sit tight in an index fund and they would have more than tripled their money. The recovery in the economy has added about $7 trillion to GDP, bringing it to nearly $21 trillion. So, it’s been a great party. We know what the beginning was like. We saw that movie. But how about the end? That’s what’s coming up next… | Recommended Link | | Biggest Stock Mystery of the Decade Revealed In Less Than One Week On Wednesday, January 22, at 8 p.m. ET, a historic event will take place… For the first time ever, Jeff Brown, who some call America’s #1 angel investor, will blow the lid off the biggest stock market mystery of the decade… “Timed Stocks”… Stocks that, thanks to the federal government, have a preset “timer” attached to their share price… And the exact moment that timer hits zero… The stock sees a sudden – and massive – spike in share price. Up to a historic (and extraordinary) 23,200%… in one day. This is an event you won’t want to miss. Click here to register now. (It’s free.) And get ready… For the world’s first Timed Stocks Summit. It’s starting January 22, at 8 p.m. ET. | | | -- | Beginning of the End At the beginning of a boom, manufacturing thrives. The furnaces are lit, employees are recalled, and output shoots up. At the end, the lights go out. Houston Molnar reported from our research department: The Institute for Supply Management (ISM) released December’s U.S. manufacturing data. And it didn’t look promising… Manufacturing is contracting at a rate we haven’t seen since the global financial crisis. The index fell to 47.2% last month – its lowest reading since 2009. December’s reading marked the fifth consecutive month of contraction. When a boom begins, companies are lean… fast-growing… and have nice margins. When it ends, they are worn out, barely profitable, and overpriced. MarketWatch brings us up to date on what’s happening today: The percentage of U.S.-listed companies losing money over the past 12 months has risen close to 40% - the highest level since the late 1990s outside of a post-recession period, The Wall Street Journal reported. Shares in the two most valuable loss-making companies have soared in the past three months, with electric vehicle maker Tesla’s stock doubling and technology and financial services company General Electric up 44%. Bad Bet At the beginning of a boom, investors are skeptical. They part with their money reluctantly, almost grudgingly… carefully looking for value. But after a few years and a few drinks, they forget all about value. They buy companies that are in the news. They want the movers and the shakers, and they don’t care how much they cost… so long as they go up. Take Tesla, for example. It’s a company that wouldn’t last long in a normal stock market. But at the bubble-end of a long, Fed-fueled boom, it’s a favorite. The more it loses… the more investors want a piece of the action. The electric auto builder is now worth more than GM and Ford combined. Investors bid up Tesla more than 100% over the last three months, to a market capitalization of $95 billion. But Tesla sold only 368,000 vehicles last year. Ford alone sold 2.9 million in the U.S. and another 3 million in China. Of course, the bet investors are making is that Tesla will be the Amazon or Google of the electric car world – with such a big lead on the competition that the others won’t be able to catch up. It’s a bad bet. Google and Amazon both benefit from the network effect. The larger they get, the more of an advantage they have. You are more likely to find what you want on Amazon, so why go elsewhere? But Tesla is like WeWork (the doomed “tech” startup we last wrote about here), not like Amazon. It gets no network effect or first-mover advantage. Because car buyers, like office-space renters, do their homework… and take the best deal they can find. They don’t care when you got in the business; they want the best car. | Recommended Link | | It’s NOT Bragging If It’s True (New Briefing Reveals His Next Big Prediction) The man who called the #1 best stock of 2016 and 2018 is at it again. He says a federal agency that regulates more than $2.6 trillion annually… along with the brightest minds at Harvard and MIT… have just unlocked the single greatest tech breakthrough of his career. A small-cap stock is now set to soar up to 1,000%… in just one day. But that’s not all. Within 12 months, it could turn a tiny stake into an entire nest egg. And it could start as soon as 9:30 AM tomorrow. | | | -- | Money Masochism Tesla will never be a one-stop shop for electric autos. But it is providing a great service to more established automakers. At huge cost, it is testing the market. The bigger players should have no trouble building electric cars and capturing market share when they see it is worth doing. They will have more dealers… and more options. And they’ll be able to quickly copy… and surpass… any technological innovations Tesla makes. More importantly, they’ll make money on their cars. Tesla, we suspect, will turn out to be an artifact of the Bubble Market of ’09-’20. Like the market itself, it depends on regular infusions of fake money. And like the whole stock market, it is financially fragile. Since Tesla makes no profits, it relies on investors who are willing to keep losing money. That money masochism will come to an abrupt end when the market goes down. And here’s our old friend, Chris Mayer of Woodlock Family Capital: This is just getting crazier and crazier… How long can this continue? Five stocks – Apple, Microsoft, Alphabet, Amazon and Facebook – make up 18% of the S&P. Interesting to see the top contributors too… Apple was up 86% last year. Microsoft up 55%. Just those two accounted for nearly 15% of the S&P 500′s return last year. The big companies move, says Chris, because investors don’t bother with research. They just want to be “in the market” with big-name stocks that go up. And the cheapest, easiest way to do that is to buy an index fund – which buys the most popular stocks, driving their prices up even higher. Then, even the hard-bitten old value investors have to buy the big names, too – just to keep up with the indexes. But then… finally… the bartender tightens the tops on the whisky bottles. The band unplugs its speakers. And the partygoers wish they had left earlier. Regards, Bill Like what you’re reading? Send your thoughts to feedback@bonnerandpartners.com. FEATURED READS Pay Is Rising Fastest for Low-Wage Earners
Job numbers may look promising, but the reality is that pay is rising fastest for low-wage earners, rather than in high-paying sectors. And much of this can be attributed to a rise in minimum wage. This trend reflects Bill’s longtime idea that we’re really worse off today than we were in the 1970s… U.S. No Longer Considers China a Currency Manipulator
With a China-U.S. trade deal signing finally on the horizon, the U.S. has removed China from its “currency-manipulator” list. Treasury Secretary Steven Mnuchin first made the designation in August of 2019, but the move drew criticism from economists and the International Monetary Fund. They said the country didn’t meet the definition of manipulator outlined in 2015 U.S. law… The Chinese Government Vows to Prevent Economic Downturn in 2020
As the world’s second largest economy, the health of China’s domestic economy carries global weight. Its government says it will “go to all lengths” to prevent growing unemployment numbers, mass layoffs, and economic slowdown, at the end of a five year plan that promised a “moderately prosperous society.” As Bill puts it, all major economies are caught in the “inflate-or-die” trap… MAILBAG Last week, Bill showed how the War on Terror put America on the path to destruction. Now, Dear Readers want solutions… I enjoy much of your writings, and I wish we were not in the Middle East in the first place (the armpit of the world), but what is your answer? They tend to dislike us very deeply (perhaps with some justification from many years), and from our support of Israel. With the technological developments of modern times do you think they will not become a huge threat to us and the world? How peaceful has the Middle East EVER been? We have been very fortunate to live in our time, and I contend they have not evolved quite so far (even though they had a huge headstart). We ignore at our own peril. – Roya B. I am an avid reader of Bill’s writings. They are like watching a car wreck. It’s gruesome and sad, but you can’t look away. Bill writes about doomsday scenarios and everything is just so negative. I can’t argue with his opinions in many cases. But here’s my question. What does Bill think needs to happen? Everything is about mistake this and mistake that, but what about positive advice about what needs to happen going forward to put us on a better path? – Steven S. While another Dear Reader thinks Bill stepped out of line in writing about former Iranian General Qassem Suleimani in Thursday’s Diary… I am puzzled as to the purpose of your musings on the killing of the terrorist Suleimani and your very generous thoughts on the Iranian government. This particular regime has vowed to wipe Israel and the United States off the map. They (Mullahs) care nothing for their people and are sponsors of world wide terrorism. Suleimani has been the architect of violence and death for decades. To question the factual nature of his “bad guy” status and his removal from this earth is foolish at best. To question the veracity and integrity of Secretary of State Mike Pompeo, without knowing even a fraction of the information available to him, is not useful. When you write about economics, your opinions are respected. When you opine on other matters, such as the topic I am referencing, I believe you do a disservice to your readers. – Doug S. Is avoiding Middle East meddling putting America in peril, as Roya believes? Was Bill too “generous” towards Suleimani, as Doug argues? Write us at feedback@bonnerandpartners.com. IN CASE YOU MISSED IT… The Biggest (And Craziest) Forecast of Teeka Tiwari’s 30 Year Career? It will happen at one specific moment in 2020. At 9:29 AM, your life will be normal. By 9:30 AM, nothing will ever be the same. Suddenly, so much money could flood into your brokerage account… You could fund an entire nest egg in a single day. In order to do so, however, you must act now. Has Teeka gone crazy? You decide. 
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