Too Much Stimulus is Causing the 'Zombification' of Capitalism: Sharma
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- Опубліковано 16 жов 2024
- Feb.26 -- Morgan Stanley Investment Management Chief Global Strategist Ruchir Sharma says that the surge in zombie companies is one of the unintended consequences of stimulus. He cautions that when zombie companies have easy access to capital, it can take a long-term toll on the economy because they drag on productivity. He joins David Westin on "Bloomberg Wall Street Week."
So basically since money is so cheap there’s no incentive for lean productivity and creative business models?
Yup, its basically a game of musical chairs with huge amounts of currency..
Basically Japan for the past decade.
In 2008 they kicked the can down the road and in 2021 we found the can again
And we will continue to kick the can untill we cant, and then everybody will be 'shocked'
@@BennieVredestein lol hopefully they kick harder this time.
@@rkalla but the can will still be empty 🤔🤣
Two economists discussing the situation... - 'Productivity is at historic lows. What should we do? Should we maybe start producing things?' - 'Hey, let's not go crazy'...
He is absolutely right. WHen you have companies like MSTR raising capital not to invest back into their business but to gamble in bitcoin, it is absurd!
Poor company - liability rich.
Wealthy company - asset rich.
MSTR - asset rich because they dumped their cash (liability).
@@bulldogwoof6954 negative earnings, revenue, and cash flow growth don’t sound like signs of a wealthy company.
@bla0092 Who is absolutely right? My interpretation of the guests opinion is that he thought it is perfectly reasonable and logical for companies to invest in bitcoin as a hedge against the devaluation of USD due to over printing.
*government shoots Hannibal*
“why would capitalism do this?”
ua-cam.com/video/pFBpUc3x_kg/v-deo.html
I’d fight the Fed but I would be charged with insurrection
Stock can drop from top to bottom and still be a 60 bagger. All this in 10y. investing is a very long journey where our temperament gets tested. have to have the capacity to suffer for long periods. have lived through the examples above, naming the stock today is pointless.
proper research, good analysis is what you need to make profit in this constant market.
I have tried investing but got discouraged by the constant fluctuations in price.
@@Jme--- That wouldn't bother you or be a problem if you let a coach guide you but bear it in mind that price fluctuations is part of the market but using coach makes the difference.
@@Mcdd7-_- I find myself in similar situation but mine is that i really don't know when to take profit or hold , but have you worked with a coach? what is the experience like and how can i get a good one?
@@christinadixon6974 "Freda Lynn Johnson" is the coach I'm quite familiar, I cant disclose much but I have been working with her since July 2020 and she has helped grow my portfolio by 400%. To connect with her you have to search her name on the web that way you can connect with her on her webpage.
Hilarious. This guy thinks we still have capitalism.
Productivity is what raises standard of living, not printing money. Otherwise all governments would be printing money!
But printing money may be necessary to keep up with the rise in real wealth.
@@gorkyd7912 then let’s print money and send to people by the truck loads. Everyone would be rich and problem will be solved, right??
@@wokeymcwokeface1974 Obviously not understanding the point.
@@gorkyd7912 I think your point is the same as the one people make of why we can't be on the gold standard..
I'm not sure why you would need to still print more money as a nation gets wealthier. Wouldn't products and services just get cheaper as services and goods become more abundant?
@@agisler87 Yes but actually no, because the mechanisms that make services and goods cheaper are scaling businesses, mechanization, growth, etc. All of which require credit, which would not work within a limited money supply. Bank can't lend a cool $mil to get a startup off the ground if that $mil is a finite sum that the bank has already fully leveraged. The growth we have seen comes from issuing enough debt to sustain maximum enterprise during a time of stability. Without the debt the growth would no be there regardless of the stability. The inflation offsets the effects of simple inheritance, without this inflation the richest family in 2000 would be the same as the richest family in 1800, they would just own all the dollars and everyone else would borrow and pay them interest meanwhile no new money enters the economy so the largest pool is always the largest.
When capital is kept artificially cheap it will be wasted.
Wow he just came to this conclusion? Morgan Stanley I could have told you this 10 years ago for half of this guys salary.
Always a chuckle when these overpaid financial advisors make basic logic assessments and then collect a few hundred g for it. Especially ironic when they point the finger at zombie companies and how it's bad to be paid to be unproductive.
i appreciate this observation "Zombie companies" in numbers.
Why do they need another 1.9T stimulus bill when the treasury general account is sitting at like 1.6T ?
I feel so bad for poor Capitalism. Little capitalism never hurt anyone. We got to stop this nasty stimulus and help the air lines.
@Mike g But if we tax the rich then how will the money trickle down to us at the bottom?
When there's no clear option, do nothing.
Pretty clear, btc as a hedge and probably emerging market stocks and commodities that do well in an inflationary environment.
Stay in cash?
The reason for increased inequality is this stimulus. You want to give reparations, that will increase inequality too? 80 percent of everything is owned by 20 percent of people. And 80 percent of the 20 percent is owned by 20 percent of the 20 percent and so on and so forth.
Isn’t it funny this what we were criticizing the Chinese government for years ago?
Andrew Yang 2024. Entrepreneur, created startups and jobs in underinvested cities in the 2010s. Ran a 2020 campaign on Universal Basic income, reducing monopoly power of zombie companies, and developing a "trickle up economy". Mayor of new york in 2021, look out!
UBI is why he will lose
How do you finance it?
There two options to finance it:
1) through sovereign debt;
2) through taxation
It is obvious that nobody will implement option 2), taxation is always impopular.
I will now analyze option 1).
Debt is lack of money. This will (almost) force the Federal Reserve to implement quantitive easing thus generating inflation further reducing consumers' ability to spend money (in simple terms prices will increase without wages being more conspicous ) moreover at some point in the future this debt would have to be repaid. The government would be forced to extract the missing money from taxes. Nobody wants to pay higher taxes.
Kudos to the host that tried so hard put China on a bad note but it ended up backfiring. Yes China still holds some state owned enterprises on basic utilities like power, transmission but the growth of China is attributed to the growth of private businesses. The debt they made is due to their rampant infrastructure investment on transportation and not some useless foreign manufactured wars and regime changes.
Wait, how many of those zombie companies are tech companies investing into the future, like amazon did?
Amazon lost 90% of its value when the tech bubble popped. It was also one of the very rare to survive. So, yes most zombies companies don't survive.
@@cheya111 Amazon isn’t very profitable. AWS is its most profitable company ...
Zombiefication is real. But it's NOT the stimulus we see. It's the collections moratoria (including unofficial commercial collections moratoria) we DON'T SEE.
Today it's not about return ON capital. Today it is about return OF capital.
The chart is wrong. There's no 11. It's an 01
Central bank intervention inevitably leads to malinvestment & misallocation of scarce resources.
What's the alternative? Boom/busts before the Fed were ten times worse and the human toll was unacceptable.
@@credman what a joke. All boom- bust dynamics are driven by debt. And central bank free money exacerbates debt & risk taking. Central banks caused the great depression, they can’t take credit for fixing what they broke.
The solution:
1) Move to gold backed sound currency
2) Outlaw interest & debt finance, to be replaced with equity finance
3) Abolish all conventional taxes, to be replaced with a 2% annual wealth tax on zero yield assets, or 10% of cashflow on positive yielding assets.
Printing money and sending checks to people is about redistribution, not quality economic growth that raises standard of living.
Standard of living is not increasing when you have 10x the amount of homeless shitting in the middle of the street running around crszy
Hi Sharma: You defined a Zombie company as one that does not have enough profit to cover their interest expense for 3 years in a row. Couldn't this definition include many/most startup companies that are subsidized by investors? I have the impression that both you and the host envision stale old businesses waiting to die. Couldn't an argument be made that America is incubating more startups now than ever in the past...and that's very positive? Does the research differentiate between old and new? Thank you
Even with start-ups in a mix, the growth from 2 to 20% is a drastic increase. The accounting details are omitted here (Shamefully, imho), but it would be interesting to know the interest/Ebit measure. Still, thank you for an interesting comment, it does give hope that the next crash is just a bear mantra I got too sold on, rather than an actual discrepancy between the real economy and stock market
Just because a company's a startup doesn't mean it doesn't have to be profitable. Facebook is a good example
You're trying to convince the masses, that doing the minimum amount of effort, to assist them is a bad idea?
3:50
"... the key to sustainable growth ..."
"sustainable ... ... growth"
lol
rich people saying the problem is rich people giving too much money to rich people... but wont give money to the People.
Zombification occured over the last 30 years... Resulting in a predisposition for the economy to easily tip into a deflationary spiral. Stimulus is one way to counter it, and it's the only way that is allowed because congress and corporations don't want to change and don't want to work towards a new and improved economy. So, more debt and more disposition to crisises that could lead to a deflationary spiral. If you don't like stimulus, then raise wages, add profit share and bonuses that tie workers into getting some of the profits so that CEO pay isn't so obscene. Then when you diverge into a conversation about BitCoin, BitCoin is not limited in supply. There is nothing keeping additional bitcoin look alikes to be formed and compete. There's nothing keeping anyone from taking the math results of mining from BitCoin and transfering those results over to other coins. It's a chain letter type of gimick to avoid oversight so that drug and gun runners can move money without bank regulations tracking the moves, that's all it is.
If prices and inflation goes up, then his relative wealth is getting smaller. Cry me a river.
wait wait wait... but aren't many companies finding legal ways to hide profits (i.e. having "no profits") as means to avoid taxes?
Just today I went to my local grocery store and hamburger meat went up .50 cent a pound in one day. A 10 percent increase. Trump and Biden printing press. The two printed up 6 trillion dollars.
Warren Buffett seems to think it's ok. So we just print more .
This is a brilliant man!
And this guy voted for Slow Joe. Of course the economic status of America will get worse.
Zombie companies are primarily in innovative mode and have room to play around without failing.
Not enough workers. Better said , more brave too .
buy some gold and silver before its to late if you dont hold it you dont own it
Even companies coming through SPACs are zombies ... just speculative grade equity deals
Zombie companies seem to be structured like pyramid ponze schemes
Too much money chasing too few goods? Please. People don’t have enough money for food. Is there a shortage of food that will send prices skyrocketing? Absurd.
Short-term: Don’t let them bite you. Long-term: Burn the fuckers.
Our dollar will eventually become valueless as we print more dollars and our standard of living is going to get worse due to inflation. This is why I am buying some Bitcoin as an insurance policy. Yes, it's risky, but there is no central government controlling it and there is a limit of 21 million Bitcoins that can be created. Even the Morgan Stanley Chief acknowledges the merits of Bitcoin.
These stimuli are non-productive. Nothing is produced for the money. Jeremy Grantham predicts a huge (50-80%) drop in the stock market this Spring.
What could go wrong??
gme and amc. i like the stock
But had the market been fair and not rigged by stimulus communism we wouldn't see record inflows to equities and not seeing bond yields as low as they are, stocks as high as they are and gold and property at all time highs. This is where the stimulus money goes to. A fraction goes to productive business that employs people and builds wealth.
Gold should be much higher then it is right now
Gold and silver shares for the win by the end of the year. Get positioned now they are a Bargin
Gold win...
Bitcoin SV is electronic cash on peer to peer network, not certainly Btc
Bloomberg is clueless. Fed has said over and over a stimulus is needed.
MORE STIMULUS > MORE MONEY TO CRYPTO MARKET > MORE MASS ADOPTION
The only stimulant I like is the caffeine in my chocolate.
I thought capitalism was undermined when we decide it’s ok to launder money for drug cartels as long as you are a big enough institution.
we know that the system is fucked up for very long time ... no need to be finance analyst with high salary.
Greed is good...
Maybe the problem is thinking this is an unintended consequence.
Number of startups declining. Spacs launching everyday.
brrrrrrrr brrrrrrrrrrrr
Just remember they want you to be poor.
👍Poverty is big business around the world, as well as in the USA.
@@janicehuff1183 It’s only going to get worse. Prices in my city have skyrocketed.
We wait untill gdp debt get to 64% just to tell everyone.
Him: US is becoming kinda like china
Me: wait, thats illegal.....
Stimulus is not causing zombification because stimulus only offsets a fraction of the tolal money that would have been created if the Pandemic did not occur.
Due to pandemic, unemployment, decreased sales/profit, and folding of business drastically reduced money supply.
Ur now talking about this
Interesting last point about how both China and the US economic models could be converging because of zombification, especially at a time where both economies are undergoing decoupling
An interviewer who says, 'their (China) state control of the economy' should be in danger of losing his job. Yea Gods boy, the US Fed and Treasury is far more in charge of the local market than China has been of theirs for 20 years. True they copied the Japanese directed growth model (which the US shut down in the 90s) and they do invest the people's money in Chinese productivity, but it is entrepreneurship on full tilt. Many Chinese companies have more overseas investors than Chinese government money! America relies on printing on its labels and boxes 'made in USA' and boosting profits through share buy backs paid with American taxpayers' US$. Those dollars the rest of the world has paid for time and again and our reward for giving the US 50 years of free money is to see the market flooded with the stuff. We no longer need it. Chinese companies even pay tax to the Chinese government. The difference between China and the US is right here ... ua-cam.com/video/keTbw6gpGKc/v-deo.html
Interesting but highly inaccurate. Zombies are a problem but productivity is also going up overall (pandemic-adjusted). Lastly, the 20% currency statement doesn’t take into consideration retired currency that gets sent back to the Treasury and destroyed and exchanged for new bills. Am I wrong? Maybe but then again no one really knows what’s going on so here’s my two cents lol.
LMBO, like Shin Godzilla, everyone is horrified to see #crapitalism's final form, it's called #fascism
Just look back fundamentally from the past history to back test the gdps national debt. And it took only 8.7 trillion for the 2008 crisis where at 29 trillion about 64% in debt in our GDP. U do the math it's not rocket science.
Legacy companies can go to hell .... zombies can have em ... ::)))))
All this "babbling" and nobody can tell when exactly are we going to have a huge inflation. Also ordinary people and small investors are in the shadow because we don't know what ECB in Europe or US monetary fund are going to do.
So far I just see that all equity/investments are going up in price. People who were expecting deflation and were working hard to accumulate cash are robbed of their wealth.
Too late now. Everything is going precisely as planned.
Currency reset
Seems like Morgan Stanley has gone short the market and purchased puts so it's time to pump out doom and gloom propaganda through minions from India...you love that stimulus Mr Sharma don't come and play academic as you aren't saying anything new
capitalism? lol you don’t halt trading securities in capitalism
You also don't give stimmy cheques or prop up a false stock market
Bitcoin, buy Bitcoin to hold your money. It is limited. But if u have money you can endless Bitcoin. Every thing makes sense.
Ok maybe worker is to non specific. Dealing with demons here .... life affirming work done with willing participants.
people who actually work to produce something tangable, as opposed to just people who profit on the work and vision of those people.
The interviewer played a buzzword bingo here huh?
I don’t know why we don’t give more money to people. Imagine what $100k to every persons would do. There is no consequence contrary to what we’ve been told. The world still supports us and let’s take advantage while we can. They owe us after all we’ve done for them.
You are confusing inflation with short selling
Potemkin market!
Underrated comment. +1000
There is still true capitalism occurring thanks to bitcoin. 1 coin will be over $1 million by 2030, probably far more.
A tulip was probably worth that in the 1700
Never a wasted opportunity to allege that cryptocurrency is a "one off" is there? Go ahead and continue investing in zombie companies then, good luck.
Bitcoin supply is NOT finite! FFS. This guy is full 💩.
Bitcon =blockchain
Blockchain = freeware
Freeware = no barriers to entry
No barriers to entry = no value
Congratulate yourself for your growth. Positive reinforcement lets u keep going. You are getting better every day.
We would be lucky to turn into China.
Role of State in china has gone down.....
Meanwhile Jackma missin...
This guy Hasn't touched upon institutions very much, pretty shit analysis
“Listen to my accent not what I’m saying... because I refuse to mention the disaster of shutting down the world over a virus that no one can hide from..”
Listen to his accent??!?!! WHO CARES!?!? He's talking about a very important issue-- zombification-- and you bring up his accent. SHAME on you, SHAME
@@richardl.currier4052 oh you have nothing to defend him on besides his accent??? Wow thanks for making my point!
@@FitnessPlanB He was talking about the zombification of our companies moron, I couldn't care less about his accent. Grow up.
First comment to say no shit Sherlock
MINDMED!!!!!