The Beach Boys sang it best: Shutdown!
The Dow Jones Industrial Average has risen 12.8% since The Federal government’s partial shutdown starting just before Christmas 2018. But since December 26th (the day after Christmas), the Dow has shot up 12.8%. And the S&P500 volatility index, the VIX, has declined by 50%.
Its fun, fun, fun for investors. But for nonessential Federal employees, Don’t Worry, Baby because you will receive back pay as soon as the shutdown is over.
Meanwhile, “Help Us Nancy and Chuck” and end the shutdown.
The Federal Reserve’s zero interest rate policy (ZIRP) and quantitative easing (QE) helped to rebuild US household net worth. But it was rebuilt with asset bubbles that invariably burst.
And courtesy of Kevin Smith at Crescat Capitalm here is a chart of asset bubbles and household/corporate debt as percentage of GDP. The most vulnerable? Canada, China and Australia.
Canada, Australia and China represent 3 of the lowest 5 countries in terms of % of stocks with negative annua free cash flows.
Shrimp on the barbie, mate?
Typically, a company with negative free cash flow indicates an inability to generate enough cash to support the business. Free cash flow tracks the cash a company has left over after meeting its operating expense.
But when 58% of the United States stockss have negative free cash flows … we got trouble in River City.
But Canada is even worse at 82%.