A short, but useful thought-experiment after we roll through the personal income figures out today. Let’s start with those:
Real DPI increased 1.0 percent in December and real PCE decreased 0.6 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
The increase in personal income in December primarily reflected increases in personal dividend income, compensation of employees, and farm proprietors’ income (table 3). Personal dividend income increased $83.4 billion, primarily reflecting a one-time special dividend payment by VMware Incorporated. Farm proprietors’ income increased $29.2 billion, which included subsidy payments associated with the Department of Agriculture’s Market Facilitation Program.
Personal outlays decreased $71.3 billion in December (table 3). Personal saving rose to $1.21 trillion in December and the personal saving rate, personal saving as a percentage of disposable personal income, was 7.6 percent (table 1)
Stocks are going crazy with giddiness: +170 when I looked.
Next week, we will get some additional data, including the unemployment rate which comes our a week from now. This will be a close one to watch, because normally when the unemployment rate hits a surprising low, as it has in recent months, a recession follows when the nominal reported rate rises by 1/2 a percentage point.
Thing is, the timing of this is loosey-goosey. Since we also live in a highly inter-connected world, we’re not sure anymore which unemployment number to watch. Because, for example, German unemployment fell unexpectedly in figures just out today. On the other hand, global ain’t ‘zactly peach: Deepening downdraft chills factory activity.
One of the most interesting things (in our view) of the global economy is to look for a long Elliott wave in the Global picture. If you consider this chart, there is a possible count that comes into view:
As you can see, there’s a decent case that a five-wave advance has been going on globally since 2009. And, when you zoom-in, you can also make the case that since market all-time-highs, we have come down in a 1-2-3 and are just coming a 4 up.
That’s why, when we look at the news flow and building tensions between India and Pakistan, we suspect that perhaps with the “sell in May and go away” idea, there will be a crisis evolving globally this spring. Talks would emerge (ideally) that would stem global panic, but that would be wave 1 down of another larger wave. Happy-talk would follow for a Wave 2, then the massive decline would be in wave 3 of this third down.
It’s really pretty elegant how all this works. Point is, as you saw in yesterday’s (sorry for such a long column!) commentary, the 72.916 year war-cycle timing suggests the sub-continent will be the first light show since Japan.
The Shopkeeper Paradox
If markets line up – in just a certain way – the end of global prosperity would likely come with blazing speed for a number of reasons. I’ll keep this simple for now.
Imagine that you owned an old-time “Record Shop” years ago. You sold the hot records of the time. Elvis, Beatles, early Stones, and even up through Blood Sweat & Tears. (We’ll be seeing them in concern later this month.)
You have this record shop. You open up a couple of additional locations, even start handing out the free “radical weekly news” rags that were once popular at such establishments.
Then the Internet happens. Being really smart, you roll your record shop into an online operation. Call it Tunazon or whatever.
As your business has continued to grow, you began to thinking about closing up the physical locations. Those damn employees – pain in the ass, ain’t they? Finally, just in the last few months after homeless turned into a huge shoplifting-for-drugs issue, you say “The hell with it.”
With stores shutting down, you’re part of the trend. But just ahead of that you did your two-bits for the economy: You hired app builders and did a huge social media effort. Why, your prospects had never been brighter.
But then, one morning this summer, your world implodes. Not only does nuclear conflict break out on the Indian sub-continent, but a global radical Islamist sect – Caliphate Online they might call themselves – exploits all those made-in-China router vulnerabilities and presto: Web dependability and cyber security implodes. Data breaches are seemingly everywhere. And a fellow on the Internet, writing ostensibly about economics and getting ready for it, headlines “The Digital Dark Age Falls.”
Within a week, scattered consumer shortage begin to appear. Barely noticeable at first, people slowly begin to understand what Nasim Taleb and other advocates of “anti-fragility” totally under-weighted: Pulling the plug.
The Shopkeeper’s Paradox described here comes down to a simple question: IF this kind of future is possible – and it may be worse since A.I. is quickly writing apps faster-better-cheaper than air-breathers – what would you do in 2019, mid-Spring, with this kind of vision for the future?
You can roll back to the sale of vinyl – except as a boutique in a big city. But that will depend on continued high consumer discretionary.
‘You can’t do necessary accounting and other such tasks since there is no web in the future and even something simple, like proving you own your own property will be? GONE!
One thought that comes by is “Gee, maybe if I could find a Greater Fool and sell my business, I could generate a lot of cash…”
Quickly, that option closes-in as delusional: The cops all over the country have been seizing cash under civil asset forfeiture laws…so that door is closed. When the stock market figures out that all online trading also disappears when the net goes down, and your online “money” in banks and credit cards will be done-in, what’ll you do?
It seems so silly, this passing of cryptocurrencies as a solution. Again, like tulips in 1634, it sort of sounds like a good idea…
With the slow die-off of the previous generation, gone will be the people who “rolled the world” onto digital platforms. 6-billion people, left from the opening round of WW III will be scrambling to figure out what they need to do in order to roll-back to legacy, paper systems.
Then we’re surprised to learn we can’t do it. At least not at the 1970’s level. Ever check where paper, pencils, pens and such come from? And do you really think convenience stores will be selling gas if they can’t process credit cards.
The shit hits the fan in a hurried and ugly way.
But the paradox this morning is “What’s the winning plan?”
I lost interest in my six-figure income long ago. The key founding principle around here was simple: Don’t live for maximum gain, instead live for minimum loss potential.
I’m peripherally involved (as a consultant) in an enterprise risk management (ERM) solutions group, so this longer-view of future and risk is really front and center.
A few script kiddies and unemployed programmers in Eastern Europe will always find data holes, but the bigger problem is when state actors go looking for power plugs at the systemic level.
Ask yourself this weekend: How will I play it? There’s no better use of personal planning time, in our view. After all, “Must be present to win” is pretty clear.
AWK (Also Worth Knowing)
Brothers involved in alleged Jussie Smollett staged attack say they ‘regret’ their involvement. So does everyone with a MAGA hat.
Canada seen approving extradition hearing against Huawei executive, which will give the Trump admin some much-needed leverage iont he wake of the Hanoi talks fail. Backing it up: Pompeo says world should have eyes wide open about Chinese tech risks. Hint, hint.
Not another one: Washington Governor Announces Run for President to Fight Climate Change. Inslee must be an IDIOT; it’s the only thing I can figure. Washington state has just had the coldest, snowiest winter since at least 1949. Climate change hype doesn’t square with facts. It’s the weather, damn it. And these shyster politicians trying to mobilize and monetize the Digilantes is well, just sickening…
The nonsense is infecting the C-level;s, too: Big U.S. pension funds ask electric utilities for decarbonization plans. Wonder why pension funds are in trouble? Think this may hint at an answer?
Also in the sleaze-bucket today: “New spokeswoman for Bernie Sanders won’t be able to vote for him in 2020 — she’s an illegal immigrant.”
And Venezuela is being shaped more and more as a US-Vs-Russia hotspot as Venezuelan vice president visits Moscow to rally support.
As the UN launches $234 million aid appeal for struggling Zimbabwe, we don’t know what the problem could possibly be. We’ve got trillions of Z-dollars laying around.
Oh, wait…yah mean paper money is ultimately worth nothing? ‘course the same is true for made-up cryptos, although $3,810 for a Bitcoin argues digital tulip mania hasn’t broken it’s fever – yet.
To really get a taste of what’s going on, read backgrounders that are given to the press corp. Here’s an example: Rress Releases: Senior State Department Official Remarks to Traveling Press.Source: St. Dept Press Releases. Then go read what is reported and the contexts and you’ll quickly see where the distortions lay…
More tomorrow – have a splendid week otherwise.