The Price of Everything and the Value of Nothing
Quarterly Investment Outlook | By Brian Schreiner
“What is a cynic? A man who knows the price of everything and the value of nothing.” —Oscar Wilde
The market value of Nvidia (NDVA) is greater than the annual gross domestic product of the United Kingdom. Investors believe it’s worth $3.9 trillion. The company’s annual revenue is $61 billion or 1.6% of its market value. It has a price-to-sales ratio of 26.5 meaning that investors are willing to pay $26.50 for every $1 of Nvidia's annual revenue. Of course, Nvidia is not the only overpriced stock in today’s market. There are hundreds; maybe thousands.
On July 4, President Trump signed The Big Beautiful Bill at the Whitehouse followed by an Independence Day celebration, featuring a military family picnic and a parade with marching bands, flyovers by F-22s, F-35s and a B-2 bomber, followed by fireworks on the Mall. As a member of the Sons of the American Revolution, Independence Day is my favorite holiday, but the signers of the Declaration of Independence would not have celebrated borrowing another $4 trillion to fund the Federal Government.
Only the two Republican Senators from Kentucky, Rand Paul and Thomas Massie, voted against the Bill. The debt is growing faster than the economy and accounting for unfunded liabilities, the math is clear: the current path will end in restructuring or default.
Politicians can raise the debt ceiling, but after they do, somebody must actually sell the debt to investors. Secretary Bessent will follow his predecessor, Janet Yellen in issuing short-term bills to finance the new debt and to cover interest payments on existing debt. This policy of taking out short-term loans to pay off older debt is the last resort. But of course, that wasn’t a topic of conversation at the picnic.
Complacency is particularly contagious within groups, organizations, and financial markets, spreading through powerful social dynamics. Initially, individuals fall prey to social proof; when they see their peers, leaders, or the majority acting with a lack of concern, they assume it is the correct way to behave and suppress their own anxieties to fall in line.
Complacency is reinforced by groupthink, where dissenting voices are ignored, marginalized, or dismissed as alarmist. As the group prioritizes a comfortable consensus over uncomfortable truths, it creates an echo chamber where the lack of concern is amplified. The ultimate consequence of this collective mindset is a gradual erosion of standards, as necessary precautions for performance and safety begin to decay into optional tasks, creating a systemic brittleness that often remains invisible until the moment a crisis strikes.
There's an old parable about two young fish swimming together when they encounter an older, wiser fish. "Good morning, boys," says the old fish, "How's the water?" The two young fish ignore the old fish and continue swimming until one of them says to the other, "What the hell is water?"
For decades, we’ve been living in a world where the United States has been the sole economic superpower;a world of low interest rates, low inflation, easy money and rising asset prices. With the U.S. stock market at all-time highs and a resilient economy, many investors are oblivious to the shifting currents, but those paying attention understand that the global world order is entering a period of significant change. Earlier this year we discussed the shifting currents in detail in our Weekly Updates: Investing in a Changing World Order: Part 1, Part 2 and Part 3.
The existing economic system built on the global debt supercycle and American hegemony is approaching its limits. The currents are shifting away from a globalized, unipolar world based on a stable monetary system and relatively free-markets to a more government-controlled, financially repressed, and politically driven economy.
We are entering a period of prolonged financial repression where governments are compelled to exert an increased level of control over financial systems in an effort to manage their high debt levels. We are seeing governments become more actively involved in directing capital flows and influencing economic outcomes. Central banks are becoming more politicized as they seek to serve government interests above economic and market-driven interests.
Expansive monetary policies and government interventions are likely to keep inflation elevated and sticky, which is the required outcome as governments must reduce the real cost of their unsustainable debts. The growing distrust in fiat currencies, which allow for hidden taxation through inflation and wealth misappropriation, will continue to push investors into safer assets and new systems of saving.
Complacent investors passively invested in a traditional blend of stocks and bonds will experience low or negative returns. Stock markets have outperformed their long-term averages for decades and will eventually return to equilibrium. Wise investors positioned to take advantage of shifting currents will actively risk-manage their portfolio prioritizing wealth preservation, hard assets and alternative investments.
Investing wisely in this environment requires more than intelligence; it requires real courage. This means understanding the incentives of governments and central banks and anticipating how those institutions will work to align markets with their goals. Despite the extreme level of complacency in the stock market, we are focused on understanding true value and identifying investment opportunities to grow and protect your wealth.
For an in-depth discussion of our two investment strategies: Alpha Rock Growth and Alpha Rock Income, download our Quarterly Investment Outlook where we highlight our investment objectives, current allocations and discuss how and why we are invested.
Interesting things I came across this week…
CPI Data Quality Declining (Apollo)
The Truth About Real ID (DarkHorse Podcast)
FBI: Jeffery Epstein had No "Client List" & Died by Suicide (Axios)
The World’s Largest Marble Quarry: Danby, VT (This Old House)
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IMPORTANT DISCLOSURE INFORMATION
This commentary reflects the personal opinions, viewpoints and analyses of the Alpha Rock Investments, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Alpha Rock Investments, LLC or performance returns of any Alpha Rock Investments, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Alpha Rock Investments, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
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