Long-term Capital Flows

Long term capital flows reflect the invisible hand of the market. They are the collective decision making of the preservation and accumulation of capital.

As centralize decision making continues to support and push debt as a solution, long-term capital flows have adjusted to the ever increasing probability of default. This is why, contrary to popular theory and understanding, stocks, interest rates, and gold have and will continue to move higher together. The invisible hand, the collective decision making of capital, is moving to protect itself against the devaluation or inflationary policies of centralized government. This is not the first time it has done so.

It is also why classical stock market valuation metrics such as PE & DY must be disregarded right now. Today's price-to-earnings (PE) and dividend yield (DY) scream overvalued in comparison to history. The stock market has figuratively given these metrics the middle finger by staging an impressive rally. The fear of centralize mismanagement is greater than the fear of paying too much. In other words, the game of confidence favors the hedges over centralized management. This will last until the next hemorrhage or crisis phase (which is coming).

Dividend Yield vs S&P 500:


S&P 500 Price-to-Earnings Ratio