In his speech while accepting the Democratic nomination for a second consecutive term, President Franklin D Roosevelt, on 27 June 1936, at Philadelphia said, that people who were prominent in the field of industry and finance generally opposed his tendency to centralize and organize the government. The term ‘Economic Royalists’ was first coined by him and finds its existence even today in the new dynasties carved out by themselves; the economic royalists of our modern civilization.
Kingdoms were built as a result of their greed and voracity for material and tangible success. There wasn’t any place among this royalty for thousands of small merchants and businessmen who strived to make a worthy use of the financial system of profit and initiative. Naturally, these privileged princes of the economic dynasties, driven by power, extended for control over the Government itself. They wrapped a new despotism created by them in the ceremonial attire of legal sanction.
Economic Royalists are market driving
The point that is being put forth here, is that, Economic Royalists, are in more ways than one can imagine, market-driving. They are the future of the stock market and determine where it stands in the long haul. Another simple case in point for now would be Microsoft and Apple. More often than not, Apple is regarded as a market-driving company, anticipating trends well in advance and taking insurmountable risks to relentlessly amaze and surprising the customers with delivered value. As opposed to this we have market-driven companies that are highly influenced by the markets and have no substantial control of or over them.
From the Indian point of view, market players like TCS, Reliance, HDFC and ITC haven assumed the role of these Royalists and are ruling the stock market. They have been enjoying their throne for over decades now. What is important to understand here is that, if one is not paying attention to fundamentals, they could be committing a grave mistake.
Earnings are definitely collapsing
Supposedly, the stock market is going to crash in 2016. Earnings are the crux of determining the worth of any entity—one of the most essential factors in deciding where key stock indices go further. As it stands, earnings are definitely collapsing. To us, it’s an indication, a big red sign advocating the stock market crash could be ahead.
A stock market collapses when the causal rudiments of the economy and corporate earnings are tormented simultaneously. Unfortunately, that is exactly what is happening right now. What is scarier is that because of a few Economic Royalists, the prominent market players, corporate earnings are expected to decline by another 2.5% in the current quarter! Stock markets cease to rise when the companies that trade in the market are seeing their proceeds declining. At such a phase, it would be recommended to take out the unprecedented and record corporate buybacks that are occurring and the whole stock market collapses.