Extreme Charts At Week's End

It’s one thing to hear someone claim that the world is spinning out of control. But it’s a lot more impactful to see the underlying trends laid out visually.

With that in mind, welcome to a new weekly series that highlights the charts, tables, and images of our descent into financial madness.

The small print on this first chart is a bit hard to read, but the story is clear: Government spending as a portion of GDP spiked during previous existential crises like the Civil War and World Wars I and II. But this year it rose to a level that exceeds all but one of those past calamities.

In other words, the US government is spending money like our survival is at stake, only this time the enemy is not a foreign army. It’s a disease and, crucially, our response to it. Given the number of states, cities, and industries that have been bankrupted by the lockdown, 2021 is likely to see an even bigger spike in fiscal stimulus.

The next chart, courtesy of Katusa Research, shows how all that government spending translates into currency, as the US money supply soars by  21% in a single year.

The stock market has happily surfed this wave of new money, with Big Tech and other momentum stocks going crazy. Electric car maker Tesla (TSLA), a favorite of day traders and hedge funds, is now more valuable than Berkshire Hathaway (BRK-A), the flagship company of iconic investor Warren Buffet, despite generating about one-tenth of Berkshire’s revenue.

But the mania isn’t limited to just speculative bubble stocks. Even as the earnings of the S&P 500 companies (red line) have cratered during the lockdown, the amount investors are willing to pay for each dollar of earnings (the P/E ratio, blue line) has soared. Mr. Market is apparently looking beyond the bleak present to a future utopia in which corporate earnings hit new record highs and never look back.

Here’s how Crescat Capital, the source of the next chart, tells its story:

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