Why Inflation Doesn’t Have a Prayer

by Rick Ackerman

V-shape mania appears to be tapering off. Years from now, market historians will come to regard the spectacular rally since late March as a case study in mass psychosis. The explosive resurgence of bulls is not only unsupported by economic reality, it flouts common sense in ways that only extraordinary popular delusions can. There is the implicit notion, for one, that just a handful of supposedly bulletproof multinationals — Apple, Facebook, Microsoft, Amazon and Google — can carry the global economy on their backs, and that this justifies ever-expanding multiples for their shares.

Even before the pandemic hit, Apple, the biggest and most popular holding in institutional portfolios, had its problems. Most of the firm’s revenues come from the sale of iPhone, a dense handful of electronic wizardry with a high price tag that has left Apple acutely vulnerable to economic downturns. If cult buyers stretch the useful life of their phones by just a couple of years, as seems likely in the severe global downturn recently begun, this will have an outsize impact on the company’s revenues.

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