Posted: 26.01.2023 12:00:00

Epilogue of big money era

American companies are becoming cheaper and are gradually turning from transnational oligopolists and monopolists into ordinary large regional companies

For the past forty years, Western economies have lived according to the theory of big money. Their key thesis is that it does not matter how much money is printed, it is important to have a developed financial system. It absorbs and digests all excess emissions. But apparently, the experiment is coming to an unsuccessful end. So far, they have not been able to cope with inflation so plainly in the United States. The economy is in recession. In addition, stock indices showed a record negative trend since 2008. Quotations of American corporate companies are rapidly flying down. The abuse of its dominant position in the global financial system, sanctions and the heating up of geopolitical conflicts deprive both American companies and financial instruments of the global market. The very big money, with the help of which the States usually got away clean from the crisis of any ‘degree of pollution’. Now the show is ending, and American multinational corporations, great, powerful, unattainable and invincible, are gradually turning into ordinary companies. Large, but without exceptional positions on a global scale. 

‘Bears’ beat ‘bulls’

Western stock indices swelled in the first two COVID-19 years, absorbing ‘helicopter’ money. It seems to be quite natural that last year there was a period of decline in quotations. Quite a normal stock cycle, which has been repeated many times, but this time the depth of the decline in quotes is somewhat unexpected. Although quite predictable. 
In 2022, key US stock indices showed the worst result since the global financial crisis. Stocks and bonds collectively lost almost $30 trillion last year. Moreover, the shares of giants, which until recently seemed unsinkable: Apple, Tesla, Google, fell significantly (by 30-50 percent) in price.
The great Amazon has been actively laying off employees and has taken up leasing idle logistics space and vehicles. The NASDAQ index for 2022 lost 33 percent, the S&P500 (called the barometer of the American economy) — almost 20. Judging by these results, investors simply lost confidence in American companies, and possibly in the American economy as a whole.

Big among equals

As a matter of fact, there is a quite reasonable explanation for the stock slalom: the global world has collapsed, and American companies (to some extent, many European ones) are gradually turning from world-class corporations into regional ones. 
For example, the same Tesla caught up with Ferrari in terms of the rate of return (the ratio of dividends to the share price) despite the growth in sales of its cars last year. This Italian company is a well-respected legend, but it is a standard asset in the engineering industry that does not excel at phenomenal returns in terms of investment. 
Through trade wars, sanctions and provocations of tension. Just remember the Taiwan case. On the one hand, all these winds of an ideal storm in combination brought some unrest in different regions: one day they froze investors’ assets in the United States, another day Western companies leave the market (or they will have to leave).
After the active use of Starlink for military purposes in Ukraine, it is obvious that this service of Elon Musk is just inaccessible for many countries. Just in case, as they say. 
Thus, sanctions in general raise doubts about co-operation in the high-tech sector. Technological, informational and cyber security has taken on a new meaning over the past year. 
Therefore, not all states are unconditionally ready to allow American companies with their technologies, software, and applications into their garden. More and more countries are already choosing to roll up their sleeves and develop their own high-tech infrastructure. 

People’s casino

Last year was marked by another phenomenal event: Chinese banks overtook American banks in terms of the number of securities placed on the open market for the first time in history. In other words, investment money is shifting definitively and irrevocably towards Asia. 
American CitiBank announced an additional reduction of 3,000 employees (about 8 percent of the payroll). Investment divisions are just scuttled. They failed to fulfil the plan last year. The layoffs indicate that the top management of the bank does not hope to achieve acceptable performance this year either.
Apparently, the American stock casino ends its existence.
At a certain point, the stock market relied on attracting private, so-called non-professional investors in order to increase turnover. Fortunately, communication technologies allow one to play on the stock exchange through a smartphone. 
This is what tens and hundreds of millions of people around the world have been doing. And it should be noted that they rushed to invest in stocks during the pandemic period, when stock indices were growing and promised prosperity. A lot of private investors began to get rid of their securities amid falling quotes. Large companies spent tens and hundreds of millions of dollars to buy back their shares, but could not resist the correction. 
In other words, there are certain fears that after such a fall (however, it may continue), the stock market, at least the American one, may never regain investor confidence. At least private. So, the stock casino is actually closed for everyone. 

Investments come down to earth

For the time being, the axiom worked: capital flows to developed countries in the event of global economic instability. But now the usual formulas no longer work. There is a very significant disappointment among investors with the dollar and euro zones.
One way or another, a certain excess of liquidity is indicated on the capital market. Investors (not only in the US, but also in other regions) are leaving their usual securities. If not completely, then partially. And they are looking for defensive assets. 
Of course, there are traditional moves — gold and other precious metals. The original actions are the same crypto assets, although they have been shaken by scandals lately. Nonetheless, investment in the actual production of the necessary things is one of the options for protective investments. Foremost in everyday life: food, building materials, furniture, clothing and so on. As well as the production of raw materials, equipment and materials for such industries. In other words, investments gradually descend from clouds of high matters closer to earthly needs. Although investors understand that there are no huge profits in these sectors, but funds are saved and quite decent profits can be made. 
In fact, our country has a lot to offer in this area. By and large, our entire economy was oriented towards real production and people’s needs. Those areas that acquire a fresh approach and respect from investors. True, American and European entrepreneurs are unlikely to invest in our assets because of the sanctions. But there are still many other states, investors from which will gladly diversify their financial portfolios. 
Undoubtedly, it is necessary to make worthy and interesting proposals. Money will not flow. But our investment opportunities and attractiveness (including projects within the framework of the Union State) are taking on a new meaning. 

Wall Street can thank the White House. No matter how much Russia, China, Iran and the penguins in Antarctica are accused of wanting to remake the world and transform the existing rules of the game, it was Washington that ruined the era of globalisation and world trade.

By Vladimir Volchkov