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As mentioned in the previous article, U.S. stocks closed in a big way on Friday. The sharp decline of Nasdaq technology leader Apple (Nasdaq: AAPL) must have contributed a lot to the index's decline.
Chart: AAPL ranks first in global company market capitalization rankings
Based on the decline of the closing price of 181.99 knives on the 4th from the closing price of 191.17 knives on the 3rd, multiplied by the total number of shares of 15.7 billion, the one-day drop is 144.1 billion knives, which is equivalent to 1037.5 billion RMB at the exchange rate of 7.2. It really fell by one trillion in one day.
Figure: AAPL gapped down
If we take the closing price of 196.45 knives on 7.31 as the high point of the rise and fall, in just one week since August, the market value has dropped by 227 billion knives, or approximately 1,634.4 billion RMB.
Apple's total market value has also officially fallen below the US$3 trillion mark, returning to the prefix "2".
I wonder if at this moment, Buffett, who has a heavy position in Apple (up to 42% of the position), has ten thousand alpacas running around in his heart...
Chart: Berkshire Hathaway’s investment portfolio
Although the market has increased expectations that the Federal Reserve will suspend interest rate hikes in September after the slowdown in non-farm employment growth, it still cannot stop the enthusiasm for falling U.S. stocks.
The paradox is that the Fed seems to be hedging against the economy. When the economy is poor, monetary policy will be loose; when the economy is good, monetary policy will be tight. As a result, the market began to be schizophrenic: a poor economy and deteriorating business operations should be negative; monetary easing seems to be a positive. So the bad is the good, and the good is the bad. So whether the good is a bad thing or the bad thing is a good thing, whether it is a bad thing or a good thing has become a fundamental question.
Monetary policy constrained by the long-term inflation target of 2% is equivalent to a gold standard in disguise. This is one of the most interesting sayings that Jiao Lian knows.
Gold's S2F (stock-to-increase ratio, also called "hardness") is estimated to be around 62, and the corresponding inflation rate is around 1.6%. Bitcoin's S2F is currently less than 60, which is not as good as gold. The inflation rate is slightly higher than gold's 1.7%-1.8%, slightly lower than the Federal Reserve's 2% inflation management target.
However, the inflation managed by the Federal Reserve is not the inflation of the US dollar, but the inflation of US prices. Therefore, strictly speaking, there is no basis for comparison with gold and Bitcoin.
However, from the perspective of MMT (Modern Monetary Theory), the Federal Reserve controls the actual stock of U.S. dollars in the market through monetary means, which is similar to regulating the "S" in S2F in disguise, thereby flexibly changing the real inflation level of the U.S. dollar. .
When the power of the visible hand of the Fed can always suppress the power of the invisible hand of the market, in such a local area, it can be considered that the Fed artificially distorts the S2F of the US dollar. If we believe the Bureau of Labor Statistics on price inflation, then we can even think that the US dollar S2F adjusted by the Federal Reserve has a hardness value between 25-50 (corresponding to an inflation of 2%-4%), and the US dollar is similar A precious metal that is slightly harder than Bitcoin and gold.
Until the day the Fed becomes powerless to sustain his power.
In fact, when Paul Walker defended the hardness of the dollar in the 1980s, he was fighting tooth and nail against asset prices. But in 2008, everything changed. The Fed has to set itself a heavy implicit goal: to protect asset prices.
Fortunately, there is enough old work to rest on. QE (quantitative easing) was launched, the money printing press was turned on, and the Federal Reserve became a god overnight, as if there was no more suffering in the world, and I believed that the Federal Reserve would be saved.
However, the two goals of protecting asset prices and managing inflation (essentially protecting the U.S. dollar) are not compatible in the long term. The Fed is not God. God is not omnipotent and cannot create anything that he cannot lift.
The Federal Reserve will eventually make a major choice: How to choose between protecting assets and protecting the U.S. dollar?
When the Fed abandons its 2% inflation management target, it means it has made a substantial choice.
After all, it is the job of the American small government to ensure that the high-quality assets of Buffett and other capital lords will always earn profits - to serve capital.
The day may not be far away when we see the Fed raising the white flag.
* * * Original work by Liu Jiaolian * * *
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(Public account: Liu Jiaolian. Knowledge Planet: The public account replies "Planet")
(Disclaimer: None of the content in this article constitutes any investment advice. Cryptocurrency is an extremely high-risk product and may return to zero at any time. Please participate with caution and be responsible for yourself.)