Will Vaccines Become A Bridge To Nowhere?

The monthly U.S. budget deficit for June 2020 was a heart-stopping record of $864 billion. For reference, last year's deficit for all of fiscal 2019 was just under $1 trillion. In other words, the June deficit was almost as much as the entire amount of red ink spilled one year ago. This year will see the worst annual amount of fiscal hemorrhaging ever—and by a whole lot. The figure will be at least $4 trillion in total, which is $2.6 trillion more than the peak suffered under the Great Recession. One has to imagine that with the Department of Labor reporting, there are now 32 million people collecting unemployment insurance as of June 27th--the amount of additional debt continues to pile up fast.

Along with the Federal Government, corporations around the world have seen their balance sheets suffer. They have issued an additional $2 trillion in new debt in the first half of 2020--a record amount. That is a 55% increase from last year's pace. $800 billion of that total dung pile was in the U.S. Of course, our central bank has destroyed capitalism by ensuring the businesses that still make typewriters and white-out can continue to borrow money. This means a tidal wave of bankruptcies has been put temporarily on ice, but the size of the insolvency storm is rapidly intensifying. Indeed, 1 out of every 5 U.S. companies are now considered Zombies. Meaning, they don't make enough profits to cover the interest expense on existing debt. The number of these zombies is surging because they feed off of the Fed's falsification of credit markets.

Corporate profits are not doing much better. The Q2 earnings season has kicked off this week, and S&P profits are expected to plunge by 44%. It is indeed prudent in these uncertain times that these companies are refusing to put out EPS guidance as well. However, the total market cap to GDP ratio has surged back to an all-time high of over 153% of GDP. But only a small number of stocks are carrying the market higher. The equal-weighted S&P 500 returns so far in 2020 are down about 12%. However, you have just a handful of tech stocks in that market-cap-weighted index, which has caused it to be down only 1% this year and have also carried the Nasdaq to a record high. In fact, AAPL, AMZN, and MSFT have a market cap that is equal to nearly 25% of the entire GDP of the United States!

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Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called,  more

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Moon Kil Woong 8 months ago Contributor's comment

People should be looking at science not talking heads speculating. Look at the FDA and their results and companies. As many know, I'm hopeful and have shares in CYDY Cytodyne mainly for its Cancer treatment, but they are the first in line at stopping Covid from causing death via lung infections. Hopefully we will get results this week.

The science and the growth and passivization of Covid itself comes first before one can speculate on the winners in the stock market. Unless you are aware of the science useless statements mean little to nothing being its dependent on science and infection rates.