Plague economics…

I can’t tell you how many times in the last 6 months I’ve heard or read someone say “Wall Street isn’t Main Street” or “the stock market isn’t the economy.”

That’s usually shorthand for telling your readers or viewers you want them to ignore record setting highs in the market in favor of focusing on more gritty, personal stories about small businesses. Those businesses are important. No one loves their small, local book shops more than I do, but I’m not going to sit here pretending that how the market does is irrelevant to the overall health of the economy or that it’s only “the 1%” who take advantage of its magical power of wealth creation.

Despite the popular press narrative that most people aren’t impacted by the stock market, the opposite is really the case. According to an article released by Pew Research in March 2020, “a majority (52%) have some level of investment in the market. Most of this comes in the form of retirement accounts such as 401(k)s.” If something north of half the people having a vested interest in Wall Street doesn’t count as having a deep influence on Main Street, I don’t know what would.

Yes, how “invested” someone is depends on many factors – age, race, and income, among others – but you really sound like an idiot when you write an article trying to convince me that I should feel badly that the market is booming. I’m never going to be upset by a story that tells me real money is being made by real people. Even when it’s painted as a story of winners and losers, I’d reminded them that there are winners and losers in ever field of endeavor – none of the great -isms of history have managed to change that beyond shifting a bit of who gets what. The wheel turns, but some group is always on top at any given moment – princes of the church, members of the politburo, or heirs to the House of Morgan – and they reap the reward of being in the right seat at the right time. I’ve never felt the need to hate them for that.

The two streets measure (mostly) different aspects of the economy. While I’ve made an effort to support local businesses with my spending during the Great Plague, I won’t for a moment feel bad about seeing growing equity prices. Both sides of the economy are important and while I’d love to see both go like gangbusters in an endless bull market, having half a loaf in this plague-ravaged environment is something to celebrate.

Clawed back…

Looking at the various trackers I use to keep tabs on “money stuff” it appears I’ve clawed back somewhere around 80% of what was lost when the floor fell out from under the stock market during the opening days of the Great Plague. I wish I could take some kind of credit for having a shrewd financial mind. It has far more to do with being willing to just stand there and take a beating without locking in all those losses by fleeing to the safety of cash equivalents… though I suppose sitting around watching the market erode your nest egg day after day after day without screaming “uncle,” is a certain kind of financial bravery of its own.

I’m happy to see a lot less red ink on the page, but I’m not even cautiously optimistic of the market’s ability to hold on to its gains in the absence of the truly massive amount of money the Federal Reserve has pushed into the system. Until I start seeing unemployment numbers normalizing, consumer confidence picking up, and a reckoning about how the foreclosures and evictions that have been held in abeyance for the last few months will be addressed, I won’t be convinced it’s not an aberration.

Call me a pessimist, if you will, but aside from there being a nice blue sky and sunshine overhead I don’t see how or where we’ve really turned a corner – and I’m fairly sure the economy doesn’t turn on how pretty a day it happens to be outside. Then again it’s possible I have completely lost track about what it is that actually does drive the economy. So much seems to have changed since I took my basic classes twenty years ago… or at least we’re pretending they’ve changed right up until the old rules jump up and bite us in the collective ass later this year.

What Annoys Jeff this Week?

1. The NeverEnding Project. If it weren’t for the Great Plague, I’d have had this particular project behind me for almost a month now. Instead, though, it got delayed, deferred, and then converted to an “online experience.” A better man than me might be laser focused on delivering a world class product – or at least be interested in something beyond the minimum acceptable standard… but honestly, my only objective is for this time-sucking vanity project to reach its long-suffering conclusion, regardless of whether it’s good, bad, or mediocre.

2. The market isn’t the economy. A million years ago, when dinosaurs roamed the earth and I was a youth, an obscure southern governor won the presidency on the back of the mantra “It’s the economy, stupid.” Despite the easy money propping up the stock market right now, I have to think that underlying economic conditions driven by our response (or lack thereof) to the Great Plague will be what drives Election 2020 as we draw towards November and people broadly start paying attention to electoral politics. My take, bound to be unpopular in MAGA circles, is that if the Republican Party wants to maintain any relevancy in the next four years, it’s time to focus all our time and money on holding on to the Senate.

3. Complaints. The number of things I do on a weekly basis because “if we don’t, someone might complain” should be disturbing. Doing things just so MaryJane Douchebag doesn’t open her yap just doesn’t feel like a good enough reason to do something that you wouldn’t otherwise do. No one (except me) seems to find it disturbing, though. I have no idea when we became a society that spends so much time worrying that someone might complain, but here we are. It’s dumb, I hate it, and it’s just another example of how the 21st century is absolute trash.

Scorn and Derision or: The Importance of Knowing Your Amendments…

For the entirety of my lifetime, the 1st, 2nd, 4th Amendments* have gotten somewhere around 95% of the total air time of anyone discussing the Constitutional Amendments in any context. The other five percent is given over to the taxation is theft crowd, celebrating the repeal of prohibition, and everything else. The last three years, something of a historical outlier, have also included not insignificant discussions of the 25th Amendment as well. 

After listening to President Trump’s claim that “When somebody is president of the United States, the authority is total,” it appears that we’re going to spend some amount of time in the near future pondering the Tenth Amendment.

The president is right that we do need to develop a plan for putting the country back to work. Sooner or later, we’re going to have to start opening up the economy. Great Plague or not, there’s a limit to how long people are going to tolerate sitting home, watching their livelihoods crumble, and seeing no obvious end in sight. Beyond the statement of fact that the economy needs to be opened, his argument that it’s a decision to be made by the federal executive branch alone is, in a word, wrong. Other words that could have been used here are: asinine, nonsense, bunk, hokum, or bullshit.

Just as the timing and decision to curtail all but essential business was made by state governors across the country, the governors will also establish the timing and criteria by which business is allowed to reopen. It may be done in conjunction with advice from the federal government, it may be backed up with federal resources, but the decision on timing and “how to” resides with the governors.

Given the 10th Amendment’s reservation of powers not delegated to the federal government to the states, there simply isn’t a lawful mechanism by which the president may issue a blanket decree that state and local government, businesses, and educational institutions are open for business. Anyone who tells you otherwise is lying. Anyone who insists that the president does, in fact, have this authority, is attempting to empower the executive branch far beyond anything envisioned under the Constitution – and deserves the scorn and derision of those who have grown and prospered under that protection of that great charter. 

Constitutional Amendments Quick Reference Guide:

  • 1st Amendment – Freedom of speech, religion, and the press
  • 2nd Amendment – Right to keep and bear arms
  • 4th Amendment – Freedom from unreasonable search and seizure
  • 10th Amendment – Reserves powers not granted to the Federal government to the states or the people
  • 16th Amendment – Allows Congress to levy a national income tax
  • 21st Amendment – Repeals prohibition
  • 25th Amendment – Clarifies the rules of presidential succession

Taking it on the chin…

A few months ago I, somewhat tongue in cheek, told a coworker the best thing that could happen for my hopes of eventual retirement would be a few years of a bear market to suppress prices and let me “back up the truck” to buy shares at deep discount prices. As long as I can keep working and manage not to drop dead of the Andromeda Strain or whatever the appropriate name for this bug is, I suppose I’m technically not wrong… but boy is it a great big case of be careful what you fucking ask for.

The US economy is currently suffering through a system-level shock the likes of which almost no one alive has personally experienced. For those of us above a certain age, the closest we’ve come is listening to grandparents or family elders tell their stories – and wonder uncomprehending about why all those years later they still saved their soap slivers in a mason jar or insisted on getting three cups of tea out of each bag.

I like to think this isn’t the start of Great Depression 2.0. The fact that the economy was roaring along at breakneck speeds just a couple of weeks ago gives me enormous faith that it can be resuscitated… eventually. Once they’ve exhausted all other options, Congress will push through bailout plans to pour trillions of dollars through the front door of the Treasury. The Federal Reserve has committed to buying government debt with reckless abandon.

Even with herculean efforts, a host of businesses will fail. No economic recover package ever passed through government can prevent that. Cash flow is the life’s blood of business and with that flow stopped, even temporarily, many won’t have the deep reserves it will take to emerge once we’ve arrived at the new normal. The best we can manage in the moment is likely following a “harm reduction” strategy – of propping up what we can and finding as soft a landing as possible for those in the workforce who are displaced.

It seems that President Trump is determined to take a short cut through the amount of time science says we need to keep the clamps on the economy. That’s a foolish and stupid take, but in some ways, I can understand the instinct. Even those who get through the pandemic with little or no ill effects will feel the unnatural consequences of an economy gone to hell in a handbag.

There’s a point where declaring business as usual will make sense. I don’t think that’s this week. I don’t think it will be next week. If you believe science, and you should, it’s not even likely to be in the next month.

As you know, I despise the media obsession with calling this the “war against COVID-19.” Even so, I take a degree of comfort in knowing that historically, the United States almost always loses the first battle of every war we’ve ever been in. We take a punch right to the chin, get knocked down, and then get up off the ground angry and looking for payback.

Today we’re still on the ground, but we’re going to get up, and when we do, we’re going to be collectively pissed the hell off and ready to do what needs to be done.

A war footing…

I hear a lot of calls to “put the nation on a war footing” to battle COVID-19. There’s a lot to unpack in a statement like that. Going on a “war footing” has implications beyond what people seem to think it means.

A few nights ago I heard one of the endless number of network talking heads claim that during World War II, Ford Motor Company was making a new 4-engine bomber every 63 minutes. That statement is absolutely true… but only if you’re looking at a range of dates from 1944 or ’45.

The B-24 Liberators built by Ford would darken the skies over Europe and the Pacific by the end of the war… but when America entered the war in 1941, exactly none of those planes had been built. Ford didn’t start building the plant (Willow Run) to build those bombers until about 1940. The plant wasn’t finished until 1942. In ’42 and ’43 production suffered from a combination of issues ranging from supply shortages, product quality, labor/management disputes, and the sheer learning curve of translating automobile production into building aircraft. What worked for building cars didn’t always translate directly into building airplanes.

Because of these challenges, Ford didn’t meet their legendary “bomber an hour” goal until 1944 – three years after America went to war and four years after they began construction on Willow Run, and only a year before the war ended.

All I’m saying is try to bear reality in mind when you hear someone say “just tell a company to ‘start making’ Product X,” whatever the product happens to be. It took Ford two years to get there even when they had the plant and equipment in place. There’s a lead time from demand signal to production. Companies that build respirators likely aren’t sitting on a lot of spare plant capacity “just in case” a once-in-a-century pandemic breaks out. New plant and new producers can be brought online, but it takes time and a massive infusion of capital… and the faster you want it, the more it’s going to cost. There’s no way around it.

If you’re saying you want the US economy to focus on kitting out the supplies and equipment needed to respond to COVID-19 to the exclusion of almost all other consumer goods, we can do that. We’ve done it before… but putting us collectively on a “war footing” has long lasting consequences and second or third order effects that absolutely no one has even started to consider.

What Annoys Jeff this Week?

In a time of global pandemic, impending financial doom, and the collapse of civilization, you might be tempted to think I wouldn’t find any day-to-day petty grievances to air. You, of course, would be exactly wrong. It may be the end of the world as we know it, but it’s far from the end of me being agitated. With that said, let’s get into it…

1. The news. The minute by minute drumbeat of the news is impossible to miss. Crisis, contagion, collapse… It can absorb you if you let it, and I, unfortunately, was letting it for the last few days. The trouble with being monopolized by the news is that it was getting in the way of my reading. So I’ll be making a conscious effort to step back and start ignoring it again. Beyond don’t leave the house unless you need to, I’m not sure what the news is going to tell me at this point that I might find personally useful. I mean if the apocalypse really comes, someone will beep me, right?

2. Bailouts. I’m increasingly uncomfortable with the various vast bailout proposals being kicked around with what fees like very little discussion or analysis other than politicians wish to be seen doing something immediately. Then again I didn’t support what eventually became the sweeping bank bailouts in 2007, government backed loans to the auto industry, or home mortgage “forgiveness.” I’d never be so bold to claim that government doesn’t have a role to play in shoring up the economy, particularly for those businesses shuttered and employees thrown out of work by executive fiat. My concern is mostly that everything I’m seeing reported on the news this week reeks of “lets throw money at it and hope it goes away” being the primary planning principle. A trillion dollars is a shit ton of money, I hope you’ll forgive me for thinking that maybe spending it should involve a bit more analysis than we’ve seen thus far.

3. Planning. Way back in 2005-ish I was involved in some preliminary “pandemic flu” planning. The end result was a plan and supporting documentation, the density of which would stun a team of oxen in their tracks. Pandemics aren’t something new. History could certainly be a guide here even if there wasn’t an actual plan. Everything I’ve seen thus far makes me wonder if anyone even bothered to read or even just dust off the damned thing from way back when.

Morality and ethics aside…

I’d be lying if I said I don’t have deep misgivings about what appears to be the exercise of increasingly unchecked power by both the federal and state governments. That’s especially true when the discussion turns to the he power of the state to “lock down” people within entire geographic areas or perhaps the entire country. Where it makes perfect sense from a medical or harm reduction standpoint, it creates ponderous questions about due process rights, false imprisonment, and the Constitutional protections Americans enjoy against arbitrary government action. Where government reasonably can require a contagious person into quarantine, does that power also extend to people who aren’t sick? Should it?

I guess you can go ahead and add constitutional scholar and medical ethicist to the long list of things that I’m not.

The morality and ethics aside, I’m wondering at what point people begin to reject medical advice in favor of “living their best life” and rolling the dice. Having spent a lifetime watching people, and Americans in particular, I hope you’ll forgive me if I doubt the average person will be perfectly willing to live under a regime of social distancing, isolation, closures, and economic armageddon for as long as the 18 months or more that Imperial College is speculating it may take for COVID-19 to run its course

What Annoys Jeff this Week?

1. “Blood in the street”. The first financial news I consciously remember hearing was during the great bull run of the 1980s. In January 1987 the Dow cracked 2000 for the first time. I was eight years old and heard the news that day in my grandparent’s living room. Today, 30+ years later, after a two plunge, the Dow stands at 25,052.83. I’m not a financial expert by any stretch. I’m not a stock picker. I pay a limited about of attention to broad trends because I do have a vested interest in being able to retire at some point in the middle-ranged future. What I’ve learned from keeping an occasional eye on these trends over the last 20-years of having a small dog in the fight, is just this: prices go up, prices go down, prices go up again. Wash, rinse, and repeat. Yes, I hate seeing account balances bleeding away as much as anyone, but the blood in the streets reporting from major news outlets feels completely overblown.

2. “California is underrepresented.” I’ve seen it a few times now – the “infographic” that shows California has only 2 senators while the 7 least populous states in the west have 14. The conclusion is that Californians, therefore, are underrepresented. They conveniently fail to mention that the same seven states are represented by only 13 representatives in the House while California weighs in with 53 members of that august body. Such posts, of course, neglect to discuss the intricate system of checks and balances designed into the Constitution – where the House of Representatives was designed as the direct representatives of the people and senators were elected by the state legislatures for purposes of representing individual state interests within the federal framework. You could almost be forgiven for believing that the United States was a democracy and not a federal republic. After all we so regularly and incorrectly use the words republic and democracy interchangeably. It’s safe to say that the founders knew a little something about mob rule and its dangers to good order and civil society. The whole massive machinery of federal government was designed, in part, to ensure that radical change couldn’t be rolled out across the country at the whim of the mob. Rest assured I’ll be at least one consistent vote against dismantling any such bulwark restraining the passions of a would-be mobocracy.

3. Reply All. Sometimes an email gets out by accident, launched across the ether using a distribution list that sweeps up all people, everywhere regardless of whether they need the information contained in the message or not. Here’s a helpful tip from your kindly Uncle Jeff: If you receive an email message via distribution that’s obviously not meant for you, you can literally just delete it and the offending email goes away. Or you and 27 of your closest friends can “reply all,” ask to be removed from the offending distribution, and be revealed as the enormous twatwaffles that you are. I mean I know from personal experience that people barely read the email that’s addressed to them for action. Why in seven hells the reply all is the one they choose to engage with is just simply beyond the limits of human understanding.

Impolitic priorities…

I spent some time this weekend updating the financial tracking software I use. It’s not quite the elegant solution I’d like but it does give me real time, at a glance visibility of everything from credit cards to mortgage debt to retirement accounts. If you know where you’re trying to get, I’ve found it helpful to also know where you’re currently standing. It’s been a years-in-the-making process to find something that would work close to the way I wanted. With the exception of a few loose ends, I’m reasonably happy with how it’s all working.

I try to make a habit of doing monthly review of where things are, how they’re doing, and what could be better allocated elsewhere. What my last half dozen reviews have told me is that despite my friends being sharply divided on the presidency of Donald Trump, the markets are more than happy to have him in the big chair. It’s probably impolitic to say, but with all other considerations being equal, I’m going to generally fall in on the side of whatever is putting dollars in the bank.

Don’t mistake that to mean that I’ve developed a deep, abiding love of Donald Trump. I know this administration has issues, I know the country is wide open to political debate about what we should and shouldn’t be doing, and while I love all of you, regardless of political affiliation, I’m not about to argue with anything that racks up double digit returns on investment and improves my chances of punching out of my cubicle for the last time somewhere close to on time and near target.