Delusions

Equities meandered somewhat aimlessly into the new week, as traders and investors eyed key US data and a sparse calendar of Fed speakers including Barkin, Williams and Quarles.

One bank wonders if folks are becoming “delusional.” “[One] way to show the paucity of prospective returns is to consider a 60/40 portfolio, where we proxy equities returns by long term earnings yield (1/37= 2.7%) and bond returns by the current 10-year yield (1.5%),” SocGen said, in their Q3 asset allocation outlook.

“The weighted average of the two is at a historic low right now, illustrating how delusional many investors are,” the bank added. The figure (below) is eye candy. Take it for what it’s worth, which may be something or may be absolutely nothing.

The pandemic is still with us, by the way. The pernicious Delta variant is proving especially vexatious for the best laid plans of public health officials and politicians. Greater Sydney is in full-on lockdown at least through July 9, for example. “Over the past 10 days, a cluster that began with an airport limousine driver… has jumped to nearly 100 cases, with dozens more expected,” The New York Times wrote, of the first citywide lockdown since the early days of the crisis. Metropolitan area residents are only permitted to leave their homes for medical necessities, exercise or food, with some exceptions for other activities deemed “essential,” like caring for family members.

Europe is likewise beset. “The variant… accounts for practically all new positive tests [in the UK], and it’s becoming more prevalent elsewhere, account[ing] for 15% of new cases in Germany in the week to June 13,” Bloomberg wrote, in the ominously-titled “Delta Variant Threatens to Destroy Another European Summer.” The strain accounts for a fifth of new cases Ireland and Portugal has a serious problem. As one top executive in Portugal’s hospitality industry recently put it, “I always said that it will be end 2021, early 2022 until COVID is really controlled.” She’s not delusional.

Meanwhile, centrist lawmakers in the US seem generally satisfied that Joe Biden won’t explicitly link a reconciliation bill with the bipartisan infrastructure proposal unveiled last week.

Read more: ‘I’m Not Signing It’

In other words, Biden’s pseudo-apology (for an errant veto threat) was seen as sufficient to reestablish centrist Republicans’ plausible deniability. They’ll still support the infrastructure plan, even as Democrats move forward with bypassing the filibuster in order to push the rest of Biden’s agenda through Congress. When the two pieces of legislation end up on his desk at virtually the same time, it’ll just be a coincidence.

The bottom line: The White House will get both an infrastructure deal and a version of the American Families Plan. And the vast majority of Americans will be better off for it.

But nobody should delude themselves. None of it is “transformational.” This is, after all, a caretaker government, not a revolution. Biden’s is a placeholder administration tasked with facilitating a smooth transition as the country backs away from a failed experiment in soft-autocracy.

Eventually, delusional Americans will stop being delusional and elect a Progressive. That’s assuming poor and middle-class voters one day realize the economic precarity they share is infinitely more important than the irrational prejudices and “values” that prompt many lower-income citizens to vote against their families’ financial well-being while clinging to ridiculous narratives like the one that says they can trust a pathological, billionaire narcissist more than they can their local bartender.

Apropos (maybe), anyone who gets the “Americas” edition of Bloomberg’s “The Bloomberg Open” newsletter was greeted with this subject line on Monday morning: “Super hot yacht spot.”

“The super rich are steering their superyachts to Greece,” we’re told. Greece now “tops Bloomberg’s superyacht leaderboard for the first time, with at least 194 parked off its shores as of June 25, a jump of more than 80 from last month.”

The news that matters to you and your family. After all, if you just work hard enough, you too can have a superyacht and park it in Greece. Capitalism told me so.