Portfolio Return as of 05/06/22:
2020: 25.65%
2021: 29.15%
YTD: 5.79%

Friday, May 28, 2021

Policies Do Have Consequences

 As reported in the Wall Street Journal, the unemployment rate in April nationwide was 6.1%, but this obscures giant variations in the states. 

With some exceptions, those run by Democrats such as California (8.3%) and New York (8.2%) continued to suffer significantly higher unemployment than those led by Republicans such as South Dakota (2.8%) and Montana (3.7%). 

It’s rare to see differences that are so stark based on party control in states. But the current partisan differences reflect different policy choices over the length and severity of pandemic lockdowns and now government benefits such as jobless insurance. Nine of the 10 states with the lowest unemployment rates are led by Republicans. The exception is Wisconsin whose Supreme Court last May invalidated Democratic Gov. Tony Evers’s lockdown...

Most states in the Midwest, South and Mountain West aren’t far off their pre-pandemic employment peaks. One obstacle to a faster recovery may be the $300 federal unemployment bonus, which many GOP governors are rejecting. Meantime, states with Democratic governments continue to reward workers for sitting on the couch. The longer that workers stay unemployed, the harder it will be to get them to return to work.

Subsidized unemployment indicates economic illiteracy. 

One of the worst parts of Biden's waste-filled stimulus plan is that it gave a big bailout for states, based on a formula that actually rewarded them for having bad numbers.



Cartoon of the Week

 


Thursday, May 27, 2021

Jobless Claims Lower, GDP Revised Lower

Weekly initial jobless claims came in at a level of 406,000 for the week ended May 22, below the Bloomberg consensus estimate of 425,000 and the prior week's unrevised 444,000 level. The four-week moving average fell by 46,000 to 458,750, and continuing claims for the week ended May 15 dropped by 96,000 to 3,642,000, south of estimates of 3,680,000. The four-week moving average of continuing claims dipped by 2,750 to 3,675,000.

April preliminary durable goods orders declined 1.3% month-over-month (m/m), versus estimates of a 0.8% rise and compared to March's upwardly-revised 1.3% increase. However, ex-transportation, orders grew 1.0% m/m, above forecasts of a 0.7% gain and compared to March's favorably-adjusted 3.2% rise. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, were up 2.3%, compared to projections of a 1.0% rise, while the prior month's figure was revised higher to a 1.6% increase.

The second look (of three) at Q1 Gross Domestic Product, the broadest measure of economic output, showed a q/q annualized rate of expansion of 6.4%, unrevised from the first release's figure and versus forecasts of an upwardly-revised 6.5% gain. Q4's figure was unadjusted at a 4.3% increase. Personal consumption was revised to an 11.3% increase, north of expectations of an upwardly-revised 10.9% rise. Q4 consumption was unadjusted at a 2.3% gain.

On inflation, the GDP Price Index was revised to a 4.3% rise, versus estimates of an unadjusted 4.1% increase, while the core PCE Index, which excludes food and energy, was adjusted higher to a 2.5% gain, compared to forecasts of an unchanged 2.3% increase.

Inflation Returns
Source: Schwab Center for Financial Research with data from Bloomberg and Morningstar, using monthly data through March 2021. Each index has a different start date, so not all average total returns have the same amount of data points. Please see footnote for start date for each index used. Indexes included are: S&P GSCI Index (Commodities), Gold United States Dollar Spot (Gold), ICE BofA U.S. Mortgage Backed Securities Index (MBS), S&P 500 Index (S&P 500), Ibbotson US 30-day  Treasury Bill Index (1-month Treasury Bills), Bloomberg Barclays U.S. Corporate Bond Index (Investment Grade Corporates), MSCI EAFE Net Total Return USD Index (International Stocks), ICE BofA U.S. Municipal Securities Index (Municipal Bonds), Bloomberg Barclays U.S. Corporate High Yield Bond Index (High-Yield Corporates), Bloomberg Barclays U.S. TIPS Index (TIPS), Ibbotson US Intermediate-Term Government Bond Index (Intermediate-term Treasuries), and Ibbotson US Long-Term Government Bond Index (Long-term Treasuries). Total returns assume reinvestment of interest or dividends plus capital gains. Note that TIPS are not included in the “inflation >4%” chart as there were no instances of inflation above 4% given the short history of the TIPS index Past performance is no guarantee of future results.


Wednesday, May 26, 2021

Housing Bubble? Or Just Supply and Demand?

The following was written by Kelly Evans, CNBC.

We've been talking about the reversal in liquidity that's popped some bubbles in stocks and crypto over the past few months (growth in M2 has dropped from 27% in February to 18% year-on-year as of April), but one place that's still rip-roaring is the housing market.

In fact, home prices are accelerating, as the Case-Shiller release showed yesterday. Year-on-year gains rose to 13.3% in March, from 12% in February. Still, that's a composite of 20 big cities. You might expect the broader FHFA national index to show more modest gains, but nope. That index showed prices up nearly 14% in March!

I asked the CEO of Realogy about this the other day--are we back to the bad old days of the early '00s housing bubble? No, he said. This one isn't driven by psychology (hey, buy a house, make a ton of money! Home prices never go down!) so much as real, consumer demand. All the millennials are buying houses all at once. Now that prices are surging, those who haven't bought are freaking out that they better buy now or be elbowed out of the market for years.

My sister lives in Denver, and her stories are amazing. One friend is relocating to a smaller city but holding onto the Denver house and renting it out in the meantime in case they have to move back in a few years--thinking they'd never get back into the market. Everything is going for $30,000 or more over asking price. People showing houses aren't even bothering to tidy them up. Three out of four houses that hit the market in Denver last month were under contract within a week. And if you think, well, that's just Denver--the market in Columbus, Ohio, is just as tight.

Check out this tweetstorm from Redfin CEO Glenn Kelman yesterday. "It has been hard to convey...how bizarre the U.S. housing market has become," he said. One buyer in Maryland "included in her written offer a pledge to name her first-born child after the seller," he said. "She lost."

(Side note: these letters to sellers--which have become a hallmark of this tight market--are starting to come under fire for promoting discrimination.)

It would be one thing if builders could quickly scramble to increase housing supply. But not only is that hard to do normally, it's nearly impossible these days with shortages and huge price hikes on key building inputs, including labor. The main homebuilder ETF is down 7.5% this month, although it's still up 30% this year.

Still, it doesn't mean that all homebuyers in this market are losing out. In fact, cashing out housing and relocating to a better market--now that work-from-home has exploded--has been a hallmark of this "YOLO economy." Even people who are paying over asking price in Denver, for instance, may be pocketing gains if they're selling in California or Connecticut.

Or as Glenn Kelman observed: "This migration to lower-cost areas may lead to lower workforce participation. For many families [we have] relocated, the money saved on housing lets one parent stop working. A wave of Redfin customers are retiring early."

So is this the kind of housing mania that the Fed needs to lean against, even if it wanted to? Not necessarily. But neither should policy makers say they won't raise rates until labor force participation is back up to pre-Covid levels. This isn't so much a cyclical phenomenon, but a structural shift in what the U.S. economy looks like.

Sunday, May 23, 2021

More Climate Change Hysteria

A little-noticed news event this week with potentially major long-term implications for the U.S. oil and gas industry was President Biden's executive order directing federal agencies to address the risks climate change poses to the U.S. financial system and federal government.

Biden's order directs federal agencies to incorporate the economic risks from climate change into decision-making, and it does not specifically address fossil fuel investments, but the concern among energy producers is that financial regulators ultimately will use their power to steer banks and investors away from the industry.

Many big banks, setting targets to align their financing with the Paris climate agreement, already have ended funding for coal projects, and the oil industry fears it could be next.

This week, the G7 nations agreed to stop international financing of coal projects by the end of this year and phase out such support for all fossil fuels.

Also this week, environmental activists who have long called for ending such funding got a boost when the International Energy Agency said "investment in new fossil fuel supply projects must cease immediately."



Wednesday, May 19, 2021

AT&T: Panic Selling Sets In

By Rida Morwa

In the last two days, we have seen extreme panic among income investors rushing out of the door and dumping their shares of AT&T (T) after hearing about the announcement of a dividend cut following the AT&T/Discovery transaction. The shares of the company are down by 8% in the past two trading sessions. This panic has created a great buying opportunity, and we explain why.

AT&T decided that they would be acquiring Discovery (DISCA) in a "Reverse Morris Trust transaction." Essentially, T will be spinning off WarnerMedia and all of its assets into a new company that will be owned 71% by current shareholders of T and 29% by current DISC shareholders.


The market's initial reaction to the merger was broadly positive until panic hit the market about the divided reduction, without looking at the big picture.

The Dividend

The dividend will be reduced. From the conference call, CEO John Stankey said:
The transaction is expected to be tax-free to AT&T and to our shareholders. AT&T will receive $43 billion in a combination of cash, debt securities and WarnerMedia's retention of certain debt. Upon close, which we expect in mid-2022, AT&T shareholders will receive stock, representing 71% of the new company with Discovery shareholders receiving the remaining 29%. We plan to reset our dividends at that time.
T expects the new dividend will be 40%-43% of "free cash flow" which they project to be over $20 billion. That works out to be around $1.12/share. It's also safe to assume that the "new company" will not be paying dividends anytime soon. So from an income standpoint, this will be a reduction and that single fact is the main reason T is selling off.

Yet the dividend alone is not the sole determiner of value. T is not cutting the dividend because their business is failing or that they don't have enough cash flow. Instead, T is vastly improving their capital allocation and providing a beautiful deal to their shareholders that they can "cash in" on in just one year, or hold on for the very long term and see significant growth.

Let's take a look at the value being created by this transaction.

NewCo

For T shareholders, they're gaining 71% ownership in a "new company" or NewCo. How much is that worth? Based on pro-forma 2020 numbers, NewCo produced $12 billion in adjusted EBITDA in 2020.

Note that the NewCo will have dramatically higher revenues than streaming peer Netflix (NFLX). In terms of scale, NewCo will be the behemoth of the streaming sector. When it comes to content, NewCo will have something for everyone. Warner has been a top 2 movie studio in 11 of the past 12 years, with tons of scripted TV shows along with premium sports rights. Meanwhile, DISC contributes the most popular "unscripted" content available today.

With more than 200,000 hours in content, this dwarfs their competition on sheer volume. NFLX, for example, has roughly 30,000 hours of content. The real kicker is that NewCo will own the content. NFLX has been facing the reality that as content producers like WarnerMedia start having their own streaming services, they will allow their distribution agreements to expire. This is what has been driving NFLX to invest increasing amounts of capital into developing its own content. Well, Warner has been producing content for more than 100 years, they have more than a little head start.

For content, NewCo will absolutely be competitive and likely blow away the competition. They have the advantage of sheer volume and diversity. 30 years ago, what will be available from NewCo would have been known as every channel on your cable subscription and would cost north of $100/month.
Valuation

One way to value the company is enterprise value/EBITDA (EV/EBITDA). At $14 billion in projected EBITDA for 2023, NewCo would be worth $182 billion at 13 times. Netflix is currently trading at 16 times EV/EBITDA.

To be conservative, we will just use 11 times EV/EBITDA, it would be worth $154 billion. Subtract $58 billion in debt, and that means the equity would be worth $96-$124 billion total. T shareholders will own 71% of that, or $68-$88 billion. That is $9.50-$12.33/current share of T.

And that's just to start. The new service will see significant growth and possibly outgrow Netflix in terms of number of subscribers.
Legacy T

Meanwhile, "Legacy T" (the company excluding WarnerMedia) is still a huge company, one that will be much better focused on their wireless and broadband. Post-split, T will still be producing more than $20 billion in free cash flow. That is $2.80/share.

Before T's acquisition of Time Warner, it routinely traded above 10x FCF outside of recessions. So how much is T worth post spin off? Well on the low-end, let's assume the value remains as low as it is today at 7 times. And on the high-end, let's assume 10 times - still a very conservative amount. That implies a valuation of $19.60-$28.00.

Sum Of The Parts

So for T shareholders:
  • They will be getting shares in NewCo that are worth $9.50-$12.33. Arguably, NewCo could be worth much more, but we would want to err on the conservative side.
  • Second, the legacy business would be worth $19.60-$28.00/share, assuming that it continues to trade at valuations consistent with those it had during the GFC and COVID. Call us crazy, but we don't consider GFC or COVID to be good comparable times for valuations.
That means that even with incredibly bearish valuations, T is worth $29.10 today at the minimum. Assuming still very conservative valuations, it is worth $40.33.

For The Shareholder

With the market panic about the prospects of a dividend cut over the past two days, investors have a great opportunity to buy the stock at very attractive valuations. Today, T is trading back close to $30/share.

Additionally, investors will have at least one more year of "big income" as T intends on paying out the full $2.08 dividend currently yielding 7%. The dividend will not be changed until after the spin-off.

A buyer today investing $30 will gain:
  • $2.08 in dividends per year until the deal is closed.
  • Two stocks (AT&T and the NewCo) with a combined worth $35-$40+ when the spin-off occurs in about a year.

That's a total return of 20%-40% in the span of about one year.

It's also entirely possible that the NewCo will be trading at such a high valuation that the AT&T investor who sells his share in the NewCo (when it starts trading or a few months later) and re-invests back the funds in AT&T may not lose a single penny of income.

We are not the only ones excited about this deal. According to Bank of America,
AT&T's stock could jump roughly 50% from current levels as its newly-formed media conglomerate with Discovery unlocks value. 
Conclusion

The market can be an emotional place. Many investors will read one data point and panic. For this merger, many investors were either fixated upon the dividend and/or read some analysis that only showed one side of the coin, creating undue panic. Unfortunately, one-sided analysis can be hurtful for investors, and often results in unnecessary losses.

At High Dividend Opportunities, we're long AT&T and we took a decision from the start not to sell. I personally added to my position yesterday morning at open when the market was in full panic. I will be happy to buy more if the price drops further. Based on our conservative analysis, there are 20% to 40% returns over the next year by investing in AT&T today, holding on, or adding to your position.

Other articles:

Buy AT&T, Get WarnerMedia For Free

Don't Sell AT&T

AT&T: What To Do About The 40% To 50% Dividend Cut

AT&T Did What? Why I Am Short-Term Bullish

Saturday, May 15, 2021

Schools: The New Havens of Wokeness

Awakened parents crashing party preaching anti-white hate

White students at the University of Wisconsin-Milwaukee were instructed to “confront whiteness” on their college campus by two far-left speakers, the latest example of rampant anti-white lectures, but elsewhere the public is rising up and pushing back on the Left’s twisted version of equality.

From critical race theory, which divides the world into race-based oppressors and oppressed, to anti-capitalism lectures, children in America’s schools are being force-fed one-sided ideological instruction. The increasingly widely used The New York Times’ 1619 curriculum, which incorrectly claimed that America was founded to protect slavery, and new mandates such as California’s controversial ethnic studies curriculum, which one teacher says teaches students “that the privileges they have are all based on race that makes them dominant or oppressors over other people,” are just a couple of prominent examples.

‘Inclusive’ Math Dumbs Down Curriculum, Fails Students Who Need Help Most

California’s new “inclusive” math curriculum promises “equity” in math. Its goal is to provide “equitable education” by “making sure all students receive the attention, respect, and resources they need to achieve their potential.”

But the state’s math curriculum is full of inefficient practices, poor standards, and an absolute revulsion for the pursuit of truth.

Biden’s COVID relief bill is chock full of anti-white reverse racism

Polls show most Americans support the federal COVID-19 relief bill. But if they knew what’s in it, they might feel differently. The bill is an affront to the American ideal of equal treatment under law — and a slap in the face for people who want everyone helped fairly.


Russia Warns of Anti-White 'Aggression' in U.S.

Russian Foreign Minister Sergei Lavrov on Thursday warned that anti-white racism might be building in the United States and said that political correctness "taken to the extreme" would have lamentable consequences.

In an interview with political scientists broadcast on national television, Moscow's top diplomat said Russia had long supported a worldwide trend that "everyone wants to get rid of racism."

Critical Race Theory Weakens Society and Breeds Hate, Minorities Say

Indoctrination is a powerful tool in the hands of left-wing ideologues and that’s unfortunate because America’s children deserve a “politically neutral education.”

While critical race theory may be becoming pervasive in America, Starbuck offered that there is hope in countering and defeating it. He cited the May 1 election in a Dallas suburb in which candidates who supported critical race theory curriculum were resoundingly defeated at the polls.

Conservative Colleges Flourish While Woke Schools Go Broke

Conservative and Christian universities across the country are dramatically increasing their enrollment numbers. Critical thinking, math, and science may once again become the pinnacle of higher learning. Meanwhile, liberal schools are seeing declines in enrollment. Many of these traditionally secular and liberal schools will be forced to close their doors in the coming years due to lack of revenue.

Thursday, May 13, 2021

After CPI Rise; Producer Prices Up More Than 6%

Companies paid much higher prices to producers in April for everything from steel to meat in another sign of inflation in an economy rapidly recovering from the pandemic. The new data comes a day after a sharp gain in consumer prices sent the stock market reeling.

The Producer Price Index rose 0.6% from March, according to the U.S. Bureau of Labor Statistics. Year over year, the PPI spiked 6.2%, the largest increase since the agency started tracking the data in 2010.

Economists polled by FactSet were expecting a 0.3% monthly increase in April and 3.8% year over year.

The core PPI, which excludes volatile items like foods, energy and trade services, rose 0.7% in April from the previous month and jumped 4.6% year over year. The increase from a year ago was the biggest jump since 2014 when the department first calculated the data.

The Producer Prices Index came into focus after Wednesday’s consumer prices report showed hotter-than-expected inflation and triggered a big sell-off in the stock market.

The Labor Department reported that the prices American consumers pay for goods and services accelerated at their fastest pace since 2008 last month with the Consumer Price Index spiking 4.2% from a year ago.

Producer prices measure the prices paid to producers as opposed to prices on the consumer level.

A sharp jump in steel mill products contributed to the leap in producer prices in April, the Labor Department said. Prices for beef and veal, pork, residential natural gas, plastic resins and materials and dairy products also moved higher last month.

Prices for steel products jumped 18.4% in April from a month earlier, while foods prices edged up 2.1%.

In addition to rising prices, one of the main reasons for the big annual pace was because of base effects, meaning inflation was very low at this time in 2020 as the Covid pandemic shut down big parts of the economy. Year-over-year comparisons are going to be distorted for the next few months, and the Federal Reserve has warned about these headline numbers, saying the spikes will be transitory.

Higher price pressures come as the country tries to recover from the pandemic-induced recession. While a pickup in inflation is normal as the economy reopens, investors fear it could squeeze companies’ margins and erode profits if lofty prices are sustained for a long period. Such a scenario could also force the central bank to start tapering easy monetary policies in place.

Wednesday, May 12, 2021

Inflations Fears Rear Ugly Head; May Be Justified

The Consumer Price Index (CPI) rose 0.8% month-over-month (m/m) in April, above the Bloomberg consensus estimate of a 0.2% gain, and compared to March's unrevised 0.6% increase. The core rate, which strips out food and energy, increased 0.9% m/m, north of expectations to match March's unadjusted 0.3% increase. Y/Y, prices were 4.2% higher (see chart below) for the headline rate, exceeding forecasts projecting a 3.6% increase and north of March's unadjusted 2.6% rise. The core rate was up 3.0% y/y, north of projections of a 2.3% rise and March's unrevised 1.6% increase.


The report showed that prices for used cars and trucks rose 10.0% m/m, posting the largest one-month increase since the series began in 1953, and accounting for over a third of the seasonally adjusted all items increase. Food prices increased in April as prices for food at home and food away both increased, while energy prices decreased slightly. Core consumer prices registered the largest monthly increase since April 1982, with nearly all major components rising.

The MBA Mortgage Application Index increased by 2.1% last week, following the prior week's 0.9% decrease. The rise came as the Refinance Index gained 2.9% and the Purchase Index was 0.8% higher. The average 30-year mortgage rate fell 7 basis points (bps) to 3.11%.

Treasuries are lower following the inflation data, with the yield on the 2-year note ticking 1 bp higher to 0.17%, the yield on the 10-year note rising 6 bps to 1.68%, and the 30-year bond rate gaining 4 bps to 2.38%.




Saturday, May 8, 2021

Up to the plate: Bad jobs report, inflation and supply chain fears

In an amazing display of deception, Biden declared after the Labor Department had its worst report in decades, “This month’s job numbers show we are on the right track.” He then went on to say how important it was to spend another $4 trillion on "jobs" and "recovery" programs.

House Speaker Nancy Pelosi stated, “The disappointing April jobs report highlights the urgent need to pass President Biden’s American Jobs and Families Plans,” referring to the additional $4 trillion of spending bills now being proposed.

As one commentator stated: "We are witnessing a witches’ brew of stupidity that, taken together, amounts to the American people piling on yet more debt for the privilege of stopping an economic recovery."

The U.S. economy added just 266,000 jobs in April after economists predicted it would add a million, according to a Department of Labor report released Friday morning. The U.S. remains nearly eight million jobs short of the 2020 peak that the economy reached prior to the pandemic, the report showed.

“The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market,” U.S. Chamber of Commerce chief policy officer Neil Bradley said in a statement Friday morning.

The weak number caused investors to believe easy monetary policies will stay in place for longer, and may provide a boost to President Biden's economic stimulus agenda. The dollar slumped toward the lowest since February, while U.S. Treasuries fluctuated before ending mostly unchanged as 10-year yields briefly fell below 1.47% after the jobs data hit. For the week, the Dow Jones and S&P 500 indexes closed at record highs, rising 2.7% and 1.2% respectively, but the Nasdaq ended lower for the third straight week, down 1.5%. Value stocks outpaced growth stocks for the week.

Nearly 60% of small business owners reported that they were trying to hire while 44% said they were struggling to fill job openings, according to the National Federation of Independent Business’ (NFIB) April jobs report released Thursday. Ninety-two percent of those looking for workers said there were few of no qualified applicants.

---------------------------------------------------------------------- 

CNN gets its priorities screwed up, again

CNN on Friday appeared to downplay a hugely disappointing jobs report that included an uptick in the nation’s unemployment rate to focus instead on a “headache” regarding the White House lawn that was allegedly caused by the former Trump administration.

The Labor Department reported shocking job figures, noting that the economy only created 266,000 jobs after economists predicted that at least 1 million would be created as the country rapidly reopens amid the receding COVID-19 pandemic.

But, as Fox News reported, one of CNN’s lead stories Friday afternoon on its website “was the White House drama over how the Trump presidency kept the lawn.”
 

---------------------------------------------------------------------- 
“The tight labor market is the biggest concern for small businesses who are competing with various factors such as supplemental unemployment benefits, childcare and in-person school restrictions, and the virus,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Many small business owners who are trying to hire are finding themselves unsuccessful and are having to delay the hiring or offer higher wages.

Twenty-two percent of small owners generally report that they are struggling to find workers, according to the NFIB’s 48-year historical average.

“The huge miss in expectations is because the unnecessary additional unemployment benefits are incentivizing people to stay home,” Alfredo Ortiz, president of the Job Creators Network, and Steve Moore, co-founder of the Committee to Unleash Prosperity, said in a joint statement on Friday. “As we’ve been saying all along, the extension of unemployment benefits would hurt our recovery, and now we are seeing that in real time.”

“Additionally, President Biden’s relinquishing leadership to the teachers union on reopening schools has prevented people from getting back to work,” the statement continued.

Supply chain vulnerabilities

Risks of rising prices are intensifying across the economy as a growing number of companies warn that supply shortages and logjams will compel them to raise prices. In fact, tight inventories have seen prices surge for raw materials, ranging from semiconductors and steel to lumber (LB1:COM) and cotton (CT1:COM). Manufacturers are scrambling to replenish stockpiles to keep up with accelerating demand as eager shoppers take out their stimulus-filled wallets following a broad vaccine rollout.

Thought bubble: As commodities and materials become more expensive, the bigger question at the table is whether faster inflation sticks around. Putting it in perspective, a sheet of 3/4" plywood at Home Depot (HD) is now selling for around $60 (depends on location), up from about $30 before the pandemic - that's a 100% increase. Investors and policymakers alike are hoping that the price hikes prove transitory, though it's still too early to predict the future, and Treasury Secretary Janet Yellen even made waves this week by suggesting tools that could combat an overheating economy.

"Straight price increases will continue to be an important element as we look at the back half of the year," Colgate-Palmolive (CL) CEO Noel Wallace told investors after the company's Q1 results. "I anticipate that you'll see more price increases across the sector, given the headwinds that everyone has faced in this space." Many other companies have also warned of price increases and supply chain disruptions on their earnings calls, including Apple (AAPL), Coca-Cola (KO), Proctor & Gamble (PG) and Kimberly-Clark (KMB).

The economic angle: Longer lead times and orders booked far in advance could result in a robust demand floor that could encourage companies to invest in ramping up production and capacity. That would be great for economies coming out of the pandemic, but the opposite could also happen, in which volatility and uncertainty destroy demand as prices become too high for consumers. The phenomenon, called the "bullwhip effect," could end up damaging the economy in the short-term, with violent swings in a range of goods.


 

Tuesday, May 4, 2021

PRO Act does nothing for American workers, everything for Union fat-cats

I currently am working for a small company in North Texas on a short-term contract. If the PRO Act were to pass, I probably would not have been able to get this contract, as this small company would not have been able to hire me as an employee. Or the rate I which I get paid would be much lower.

This is another step toward the government's full control over its populace. Biden was so wrong when he said "We the people..is the government." Sorry, We The People...Are the PEOPLE.   

During his remarks to Congress, Biden asked the lawmakers “to pass the Protect the Right to Organize Act—the PRO Act—and send it to my desk so we can support the right to unionize.”

The legislation dubbed the PRO Act essentially would take a California law known as AB 5 national. However, the California measure wasn’t very popular after the Legislature passed it and the governor signed it into law.

Previously, drivers for ride-hailing services such as Uber and Lyft; freelance writers, musicians, and others, and various independent contractors could work for companies without being considered full-time or part-time employees.

The new law required workers in California to be considered employees, narrowing opportunities for workers that wanted to set their own hours.

In November, voters opted to significantly weaken the law, though not discard it entirely, by passing a ballot question called Prop 22 after the law was seen as harming opportunities for freelancers and independent contractors.

The ballot initiative carved out Uber and Lyft drivers, but the law still affects most other part-time or freelance workers in California.

“If a policy is too liberal for California voters, you would think it’s definitely not something for the rest of the country,” Alfredo Ortiz, president of the Job Creators Network, a small business advocacy group, told The Daily Signal.

“That law has had a horrible impact on freelancers and independent contractors,” Ortiz said. “Even people in the movie industry that used to get contract jobs are losing opportunities. If you are a sole proprietor, you are a small business.”

The PRO Act touted by Biden would prohibit contract or freelance work. Organized labor strongly backs the legislation as a means of increasing union membership.

The Freelancers Union estimates that 1 in 3 workers in the United States participates in independent work such as contracting, freelancing, and consulting. About 10% of workers perform independent work as their primary job.

Fewer than 1 in 10 independent contractors would prefer a traditional work arrangement, according to the Bureau of Labor Statistics.

Specifically, the federal legislation would broaden the definition of “employee” under the National Labor Relations Act. Under the new definition, an individual who performs any service—with some exceptions—would be an employee rather than an independent contractor.

The proposal also raises concerns about invading workers’ privacy, doing away with the right to secret ballots in union elections, and invalidating 27 state right-to-work laws against compulsory union membership.

“California has been a policy disaster, yet President Biden seems to view it as a success,” Ortiz said.

US Producer Prices Surge 11 Percent on Higher Food Costs

Wholesale prices in the U.S. soared 11% in April from a year earlier, a hefty gain that indicates high inflation will remain a burden for co...