American stock markets have been disconnected from events for too long and a reckoning, which may come soon, is likely to burn those ordinary investors simply trying to grow their nest eggs.
It is a dangerous time. Despite the volatile and uncertain environment, US stock market indexes continued to climb following a short and sharp blip in February. After that, shares had their best period in more than 20 years in the second quarter.
Money is pouring into growth stocks like the big technology companies, a New York hedge fund owner told me, with little going the way of the "old economy". The millions of people in the US using the Robinhood app to invest for the first time in shares have also skewed the market.
All of this is related to the actions of the Federal Reserve, the central bank of the US, which has since March pumped trillions of dollars into securities to ensure that borrowing rates remain low and that there is enough liquidity in the financial system to give confidence to businesses and people to keep spending.
It seems, however, as if the rally has finally lost some momentum as the coronavirus pandemic has been gathering steam in the US with a spike in new infections. According to some opinion polls, Americans' confidence in the government's ability to handle the crisis - in areas such as getting children back to school - and the Fed's ability to handle the economy is weakening. The price of gold is up nearly 30 per cent this year, hitting another record this week. An investor friend of mine explained to me that this can be viewed as a sign of waning confidence in governments.
Still, a reckoning has been coming for some time, even before the coronavirus hit.
Under Jerome Powell, the Federal Reserve has pumped trillions of dollars into securities to ensure that borrowing rates remain low. Reuters
Nearly a year ago, Michael Burry, who made a fortune predicting the last financial crisis, as depicted in the film The Big Short, warned that the $4 trillion or so of passive money tracking American stock markets was creating a new bubble. The principles behind passive investing – which are sensible – are that over a long period of time you will get better returns by tracking an index, or an entire sector, rather than by trying to pick individual stocks. This strategy tries to account for the boom and bust cycle of markets.
But Mr Burry said in August 2019 that those people investing in tracker funds were not doing so based on the kind of "analysis that is required for true price discovery”; such analysis is based on using the future cash flow or current assets of a company to place a value on it.
Mr Burry warned that this was no longer happening and, as a result, huge amounts of money have been flowing into funds in an unsustainable manner, echoing what happened more than a decade ago when very risky assets became outlandishly popular with investors who didn't fully understand them.
When it came to light that they weren’t worth anywhere near the levels they had reached, it was a swift and brutal ride to the bottom for anyone holding the securities these assets were backing. Confidence evaporated.
Nearly a year ago, Michael Burry warned that the $4 trillion or so of passive money tracking US stock markets was creating a new bubble. AFP
Michael Burry has warned that huge amounts of money have been flowing into funds in an unsustainable manner, echoing what happened more than a decade ago
Today, the investors who use these low-cost and highly efficient passive strategies now make up nearly half of the money in US stocks and have become a risk to the system in recent years.
Yet the concern right now isn't just about how passive investors might impact markets. The broader worry is why American stocks remain attractive during the worst crisis in a century. It is frightening to consider that so much money is being put at risk like this when it is so obvious that there is a disconnect.
Yet, we are even more in the dark about what the true value of financial assets should be in July 2020 than we even were in 2008. The risk profile of US stocks cannot be accurately measured. There are too many unknowns about how the pandemic will unfold and what the actual impact will be on businesses and economies. What the share price of a company should be right now will be not much more than a guess. There should be a deep discount on share prices, not a premium.
At some point, investors will realise that current valuations do not match reality and the race for the exit will be far uglier than what we saw in the last financial crisis.
That awakening could come very soon too, with earnings season under way. We will gain some much-needed clarity about the scale of the damage that was wrought by the coronavirus on corporations in April, May and June, as well as receive some guidance about what the rest of the year could look like.
Confidence is a fragile thing. Once it is lost, getting it back is expensive and time-consuming.
The experience since the last financial crisis a decade ago is ample evidence of that, with central banks around the world unable to wind down their support without severe consequences.
Perhaps that is what many investors currently believe too, that they can always rely on the backing of the US government, no matter the events playing out on the ground, to keep stock markets chugging along.
Yet can the Fed step up its support from these already heady levels if there is another market crash? How long can it continue to pour trillions of dollars into the system after having done so for much of the past decade?
Even if it can meet such expectations, it might be too late by then for badly wounded investors.
Mustafa Alrawi is an assistant editor-in-chief at The National
What are the main cyber security threats?
Cyber crime - This includes fraud, impersonation, scams and deepfake technology, tactics that are increasingly targeting infrastructure and exploiting human vulnerabilities. Cyber terrorism - Social media platforms are used to spread radical ideologies, misinformation and disinformation, often with the aim of disrupting critical infrastructure such as power grids. Cyber warfare - Shaped by geopolitical tension, hostile actors seek to infiltrate and compromise national infrastructure, using one country’s systems as a springboard to launch attacks on others.
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Why your domicile status is important
Your UK residence status is assessed using the statutory residence test. While your residence status – ie where you live - is assessed every year, your domicile status is assessed over your lifetime.
Your domicile of origin generally comes from your parents and if your parents were not married, then it is decided by your father. Your domicile is generally the country your father considered his permanent home when you were born.
UK residents who have their permanent home ("domicile") outside the UK may not have to pay UK tax on foreign income. For example, they do not pay tax on foreign income or gains if they are less than £2,000 in the tax year and do not transfer that gain to a UK bank account.
A UK-domiciled person, however, is liable for UK tax on their worldwide income and gains when they are resident in the UK.
Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
What: The Al Burda Festival
When: November 14 (from 10am)
Where: Warehouse421, Abu Dhabi
The Al Burda Festival is a celebration of Islamic art and culture, featuring talks, performances and exhibitions. Organised by the Ministry of Culture and Knowledge Development, this one-day event opens with a session on the future of Islamic art. With this in mind, it is followed by a number of workshops and “masterclass” sessions in everything from calligraphy and typography to geometry and the origins of Islamic design. There will also be discussions on subjects including ‘Who is the Audience for Islamic Art?’ and ‘New Markets for Islamic Design.’ A live performance from Kuwaiti guitarist Yousif Yaseen should be one of the highlights of the day.
Full list of Emmy 2020 nominations
LEAD ACTOR IN A COMEDY SERIES
Anthony Anderson, Black-ish
Don Cheadle, Black Monday
Ted Danson, The Good Place
Michael Douglas, The Kominsky Method
Eugene Levy, Schitt’s Creek
Ramy Youssef, Ramy
LEAD ACTRESS IN A COMEDY SERIES
Christina Applegate, Dead to Me
Rachel Brosnahan, The Marvelous Mrs. Maisel
Linda Cardellini, Dead to Me
Catherine O’Hara, Schitt’s Creek
Issa Rae, Insecure
Tracee Ellis Ross, Black-ish
OUTSTANDING VARIETY/TALK SERIES
The Daily Show with Trevor Noah Full Frontal with Samantha Bee Jimmy Kimmel Live Last Week Tonight with John Oliver The Late Show with Stephen Colbert
LEAD ACTOR IN A DRAMA SERIES
Jason Bateman, Ozark
Sterling K. Brown, This Is Us
Steve Carell, The Morning Show
Brian Cox, Succession
Billy Porter, Pose
Jeremy Strong, Succession
LEAD ACTRESS IN A DRAMA SERIES
Jennifer Aniston, The Morning Show
Olivia Colman, The Crown
Jodie Comer, Killing Eve
Laura Linney, Ozark
Sandra Oh, Killing Eve
Zendaya, Euphoria
OUTSTANDING REALITY/COMPETITION PROGRAM
The Masked Singer
Nailed It!
RuPaul’s Drag Race
Top Chef
The Voice
LEAD ACTOR IN A LIMITED SERIES/TV MOVIE
Jeremy Irons, Watchmen
Hugh Jackman, Bad Education
Paul Mescal, Normal People
Jeremy Pope, Hollywood
Mark Ruffalo, I Know This Much Is True
LEAD ACTRESS IN A LIMITED SERIES/TV MOVIE
Cate Blanchett, Mrs. America
Shira Haas, Unorthodox
Regina King, Watchmen
Octavia Spencer, Self Made
Kerry Washington, Little Fires Everywhere
OUTSTANDING LIMITED SERIES
Little Fires Everywhere
Mrs. America
Unbelievable
Unorthodox
Watchmen
OUTSTANDING COMEDY SERIES
Curb Your Enthusiasm
Dead to Me
The Good Place
Insecure
The Kominsky Method
The Marvelous Mrs. Maisel
Schitt’s Creek
What We Do In The Shadows
OUTSTANDING DRAMA SERIES
Better Call Saul
The Crown
The Handmaid’s Tale
Killing Eve
The Mandalorian
Ozark
Stranger Things
Succession
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HAEMOGLOBIN DISORDERS EXPLAINED
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
Cyberbullying or online bullying could take many forms such as sending unkind or rude messages to someone, socially isolating people from groups, sharing embarrassing pictures of them, or spreading rumors about them.
Cyberbullying can take place on various platforms such as messages, on social media, on group chats, or games.
Parents should watch out for behavioural changes in their children.
When children are being bullied they they may be feel embarrassed and isolated, so parents should watch out for signs of signs of depression and anxiety
Pox that threatens the Middle East's native species
Camelpox
Caused by a virus related to the one that causes human smallpox, camelpox typically causes fever, swelling of lymph nodes and skin lesions in camels aged over three, but the animal usually recovers after a month or so. Younger animals may develop a more acute form that causes internal lesions and diarrhoea, and is often fatal, especially when secondary infections result. It is found across the Middle East as well as in parts of Asia, Africa, Russia and India.
Falconpox
Falconpox can cause a variety of types of lesions, which can affect, for example, the eyelids, feet and the areas above and below the beak. It is a problem among captive falcons and is one of many types of avian pox or avipox diseases that together affect dozens of bird species across the world. Among the other forms are pigeonpox, turkeypox, starlingpox and canarypox. Avipox viruses are spread by mosquitoes and direct bird-to-bird contact.
Houbarapox
Houbarapox is, like falconpox, one of the many forms of avipox diseases. It exists in various forms, with a type that causes skin lesions being least likely to result in death. Other forms cause more severe lesions, including internal lesions, and are more likely to kill the bird, often because secondary infections develop. This summer the CVRL reported an outbreak of pox in houbaras after rains in spring led to an increase in mosquito numbers.
