Anthony Scaramucci (aka the Mooch) is upset. Earlier this year, having bravely hitched his wagon to Donald Trump as a member of his campaign's economic advisory group in 2016, he was convinced that he was about to be offered a plum job. Assistant to the president perhaps. So he arranged to sell his hedge fund business, Skybridge, to HNA, a Chinese conglomerate, for $275m and waited for his phone call. It didn't come.
Now he is unemployed. He isn't exactly under a financial imperative to panic. But it probably doesn't feel good either. On the plus side, he may have got out in the nick of time. His funds haven't performed particularly well over the last few years, says Vanity Fair. And, if you turn to our markets page, you will see that the signs are not good for the US market as a whole. Other hedge-fund managers have been selling out and closing down without needing Trump as a prompt and that could be a hint that the rest of us should do the same.
Look at the closure of the $7bn Eton Park hedge fund in March. Its manager, Eric Mindich, wasn't forced to close it by politics or by clients. He just noted that market conditions are "unfavourable". And so they are. Pretty much every valuation model for US stocks ever invented is flashing red at the moment. That's true of the usual measures price to earnings, price to sales, and the cyclically adjusted p/e ratio (Cape) and true of most of the less well-known ones. Take the Buffett ratio. This takes the ratio of the value of all the stocks listed in the US to nominal GDP. Back in 2001, says US strategist Ed Yardeni, Buffett noted that you should buy when the ratio is 0.7-0.8, but know that you are "playing with fire" when it heads to 2 as it did in 1999. It is now about 1.9.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In short, buy today and you are locking in valuations that only make sense if corporate earnings keep rising as fast as they are now for some years to come, inflation, unemployment and bond yields stay insanely low (in which case stocks still look reasonable value on a relative yield basis and Buffett himself said earlier this year that stocks are "on the cheap side" for this reason) or Donald Trump turns out to be a political and economic genius.
The first outcome is possible, given that there is a period of moderate global growth on the go at the moment. The last, whatever poor Scaramucci might have thought a few months ago, isn't looking that likely. I have slightly higher hopes for Theresa May in this week's cover story,we look at her manifesto. It's interventionist, statist, overly tolerant of debt and a little bit mean to business. However, on the plus side, it is exactly as we expected it to be and much, much better than Jeremy Corbyn's.
-
8 of the best properties for sale near ski slopesThe best properties for sale near ski slopes – from a luxury cabin in Geilo, one of Norway’s premier ski resorts, to a large chalet in Valais, Switzerland
-
Cash hoarders take total UK savings to £2 trillion – why aren’t we investing?Investment-shy Brits are hoarding huge amounts of cash in their savings accounts. We look at the case for saving versus investing.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
