Archive for March 2021

This recession has been different from all others not just because spending on goods boomed, when normally it falls, but because spending on services, which usually barely dips, tanked. In 20Q4 Y-o-Y inflation-adjusted goods spending was up 7.2%; it was down 6.8% for services! With savings rates way up and much of that money among…

Tax Trouble With the stimulus package done, now comes a proposed $3 trillion infrastructure bill, and importantly, tax hikes to help pay for some of this spending. Assuming the corporate tax rate rises from 21% to 28%, and assuming P/E ratios remain unchanged, which is optimistic, corporate earnings would decline 8% and equity prices 7%.…

The US population numbers 330 million. 22.3% are too young to receive a Covid-19 shot. Assuming 25% of the adult population are unwilling to be vaccinated, that leaves 192 million to be vaccinated, or 58.8%, well below the most optimistic percentage needed to achieve herd immunity. We must vaccinate children/adolescents as soon as the FDA…

The Friday File: The 193km long Suez Canal, which carries 12% of worldwide trade, 10% of all oil/day, and generates $15.9 million/day in transit fees from the 50 ships/day that sail through it, is impassable. One of the world’s largest container ships, the 400 meter (quarter mile!) long, Ever Given, lengthier than the Empire State…

This recession has upended three well-understood economic stories. First, the “Hollowing Out” of middle-income jobs at the expense of high- and low-income jobs has utterly stopped as the pandemic has crushed low-end employment. Second, the idea that metro areas steadily gain population faster than non-metros has been totally inverted. Third, evidence that recessions always hit…

Interest rates on long-bonds are the result of inflation expectations as well as prospects of future GDP growth. All else equal, higher anticipated impending inflation raises interest rates, as does better projected economic growth. If long-bonds rise because markets anticipate strong growth, that is good as better growth, higher employment, and more investment, can more…

While you might think airlines make money flying people around, it’s their frequent flier programs and critically, the co-branded credit cards airlines issue, and for which they collect a hefty fee on each purchase, where airlines clean up. Yes, customers earn miles, but airlines put such fliers on empty seats, and data show fliers overpay…

Unlike music, books, or movies which can make the musician/writer/director/actor fantastically wealthy while simultaneously providing enjoyment to millions, a non-fungible token (NFT) of the identical movie or piece of music creates value purely because it is scarce. While contrived scarcity isn’t new, think Birkin bags and Lamborghinis, the new wrinkle is that NFTs do not…

The Friday File: The hottest temperature recorded in North America is 56.7C (134.06F) in Death Valley. In Africa and Australia, the mercury hit 55C (131F) in Kebili and Oodnadatta respectively. In Asia, peak heat is 54C (129.2F) in Mitribah, while in South America hotness crested at 48.9C (120.2F) in Rivadavia. In Europe, Athens holds the…

In yesterday’s Fed announcement, there was no mention of tapering, twisting, let alone rate raising, and rate liftoff is still not expected until 2023. Moreover, despite trillions in stimulus, Fed forecasts of GDP, inflation, and unemployment for 2022 and 2023 barely budged; at most by two-tenths of a point. This tells us that despite massive…