Pick a disaster…plenty to choose from…no crowding, social distance, please!
And so begins another Thursday.
Besides the Fed data on “jacking up the money supply” – after the close today – there is the small matter of the implosion of the once middle-class in ‘Merica, as revealed in the Wednesday consumer debt report.
In it, the Fed reports that March consumer debt was decreasing at a rate of 4.3 percent annualized. Then in April, debt collapsed 20% annualized, and in May it was down 5.3 percent. All of which, one has to remember, is offset a month, or so, from actual expenditures.
The reason for the offset is obvious when you think about it: If you piled in high-priced toilet paper using your credit cards (revolving debt in the report here), it didn’t “hit the books” until it came up as items on the month-end statement.
As a result, when we look at financial impacts of CV-19, we can infer the impact on the economy will be in the range of 20% in March as the impacts continue to ripple.
About Those Ripples
We trust you saw where United Airlines to send layoff notices to nearly half of US employees? This is only the tip of the iceberg. See our comments section for the recent discussion of “deals” on travel to former “hot-spots” like Hawaii.
The problem isn’t “owned” by the U.S., of course. Up north of us, Canada’s Via to temporarily layoff about 1,000 workers as pandemic impacts its business. Then there are car rental outfits, ride sharing, and hotels and AirLetMeBe…
The overall decline in activity is showing up in unexpected places, as well. Take for example how Bed Bath & Beyond Tumbles on 1st-Quarter Sales Decline. Are people spending less time in the Throne Room?
The Servant Classes Are Screwed
We’ve talked about this in uncounted columns, but here’s the thing to keep in mind, now: Given a choice, you will want to back-out of being in the “servant class” should the opportunity arise.
When America was producing up to its eyeballs, the service industry was where the growth was. In fact, going back to when I was a “wee one” America had less than 3-service workers (servants) for each of the “goods makers.” That was a time when unions were strong and making goods made sense. A U.A.W. member, for example, could afford a decent home, support a family, and even have enough left-over for the occasional hunting or fishing trip.
That has changed: The manic run into “services” – that is, swelling up the Servant Class to do everything short of wiping our butts for us – is over.
You may not be a regular reader of the Memphis Flyer, but check out their article nails the macro economic changes now taking root: “Back to Business? The Crumbling Foundations of the Service Industry…”
You will need to read “the news” with a firm understanding of statistics when you go off “researching.” It’s our old friend “The Denominator Problem.”
Sure, you can find stories like the Arkansas Democrat story U.S. service-industry index soars. But remember Uncle George’s Reality Medicine: If jobs decline by 50%, then when they return to previous levels, any gains are framed as “200 percent increases!”
The Denominator Problem is one of the most powerful tools in investing, too. And here’s why: Say you start with $100 and lose half of it. Now down to 50% of your original stake. What happens when you navigate a 50% gain? Are you back even?
Nope: $50 X 1.5 is just $75-bucks. So, remember The Denominator Problem is at work in life, trying to “average you back down” into “The Servant Class” if you’re not paying attention.
All Glittery-Like – NGFY
We don’t know much about Benzinga, but they have a good eye for trend change, judging by their headline “Silver Investment Demand Up by 10 Percent in First Half of 2020.”
And the CNBC piece (“Gold is the ‘real bitcoin’: Trader sees new highs ahead for the metal“) saves me from pointing out again that Bitcoin and the other crypto-tulips are always just one blown circuit breaker from zero value. NGFY – No Gold For You!
The Bit-con was languishing around $9,404 when we checked, since our (more-easily fooled) readers who love a good story are hanging on to the notion that “electrons matter.” Well, have fun with that…
China as Germany II?
Keeping an eye out West, we’ve been watching this evolving conflict between India and China. In part because India, says Zeus the Cat, looks like it’s being set up for a gigantic pincers movement.
“ You need to understand,” spoke the strategic Cat “That when you see stories like Pompeo says China took incredibly aggressive action in recent clash with India, you have to look down the road to Pakistan which has been roped into being a keystone of the Chinese Belted and Rolled (sic) Initiative. You don’t spend enough time monitoring the China Economic net, do you? “China-Pakistan Economic Corridor continues to make strides: Chinese scholar” sticks out like a sore border…”
To be sure, ol’ Zeus has a point: Just like the Trump administration got nervous and anxious about getting people back to work here, China has been moving to ramp Pakistan trade back up, as evidenced in COVID-19: China, Pakistan consider proposal to resume border trade next week.
As We Warned
Back in January, we managed to drive off a fair number of readers predicting that by summer Covid-19 cases would would be well over 10-million. Why, people thought Ure was nuts. And what about his stocking up on Hormel Tamale’s and Dinty Moore? Why, the fellow was a nut-job for sure, along with his cases of Cottonelle....
Yet, the headlines continue to support our ongoing prepping around the old ranch. Especially since Worldwide coronavirus cases surpass 12 million.
You won’t want to read this to the kids (you also might want them to leave the room while you read this next part): Our data projections presently look for a Thanksgiving global case load that could top 200- MILLION and a death toll of 2.2 million. Higher if the strain “goes killer” on us.
Here in the U.S. we have modeled a “likely scenario” of 50-million cases and half a million dead for the same period. (You can let the kids back in now…)
Adding to you “dining and dancing pleasure” at election time, will be the matter of delayed results. And that, figures Goldman-Sachs could really screw with the market. See the CNBC summary Goldman warns delayed election results this November similar to Bush-Gore could rock the market for more.
Near as we can figure it, someone at Goldman may have read the two-days earlier Gloomberg story Delayed Election Results Could Test Social Media Companies… and figured it would be a way to get the firm’s name out there. This is – in neoclassic public relations – called end-on marketing. Take a “catchy idea” and brand it as Ure-owned.
DDD: Daily Dose of Data
Two dots to plot on your mental model of the messed-up mess:
Weekly “de-employment” numbers are just out:
In the week ending July 4, the advance figure for seasonally adjusted initial claims was 1,314,000, a decrease of 99,000 from the previous week’s revised level. The previous week’s level was revised down by 14,000 from 1,427,000 to 1,413,000. The 4-week moving average was 1,437,250, a decrease of 63,000 from the previous week’s revised average. The previous week’s average was revised down by 3,500 from 1,503,750 to 1,500,250.
After the data, the futures were mixed, though the Tech Giants (to our unerring gaze) seem to have figured out that there won’t be an anti-trust action against Amazon until after the election. Nor is “social media regulation” expected, either.
Trump doesn’t have the political strength right now to attack on either front. Yet, is SloJoe picks up much more, and Trump looks “beatable” then Trump might do a scorched earth attack on the way to the exit.
Later -after the end of the trading session – we will have
hemorrhoids fresh Money Supply data for Surviving Servants in Zimbabwe II. (SSZ2)
ATR (Around The Ranch): Tractor Envy
Our neighbors up the hill now have just about EVERYTHING a young couple could ask for: They became parents almost a month back. Both have great jobs. And…the kicker…they are now the proud owners of one of the finest tractor’s I’ve ever laid eyes on.
Kubota – 60-horsepower – with an air conditioned cab. OK, so $46-kilobucks but OMG what a farm tool!
And the capper? The neighbor picked up a 3-point powered huge stump grinder for it, as well. (not in the 46K ticket price)
I’ve about beat my little 24-horse Kubota to death out here. I figure The Big K factory really ought to have been built in Texas because the land is tougher than
Georgia (except up in the northeast mountains, around Ellijay). But WOW. What a rig.
Don’t tell anyone, but I’m having Amazon send him a “Tractor-Warming” gift. Not very expensive, but one of the most useful things you can put on a tractor in these parts: An inclinometer.
You see, one of the biggest risks of “tractoring” is getting sideways on too steep a slope.
Somewhere, buried in the operators manual, you can usually find the “critical angle” information. “Don’t work slopes greater than xxx-degrees to avoid rollover accidents.”
With a simple sailboat inclinometer (and two stick-on Dymo labels marking the “do not mess with angles”) the problem can be avoided.
One of the ways to improve your odds of living longer than 71 is to not do stupid things. But, when you have “land chores” that involve grown-up machinery on sloped land, the “right accessories” can increase your odds of winning the Social Security Gamble…
Write when you get rich (or upright),