Showing posts from August, 2021

Pandemic Has Consequences on Markets and Economy

But is it really bad as it seems? While there seems to be an uptick in cases reported, and some hospitals are at capacity -- because most of them scaled back after the January peak -- are more people dying, as the media is reporting?  No. Not at levels seen in January 2021. Data from the CDC and other sources say not. 

Will There Ever Be a Top to the Market?

The S&P 500 is up 20% this year, without a single 5 percent pullback or correction. Last week, we saw between 2 to 3 percent pullback and I advised staying the course . This week, markets were up about 3 percent. While there is no way to predict the future, at some point the market will correct. There's not a lot that the market seems troubled by: Afghanistan, Covid, or Inflation seems of little concern to investors right now. Actually, the economy is doing pretty well, all things considered, and business profits are looking OK. And ultimately, profits drive the market.  The Fed is not going to do anything until later this year. So interest rates will continue to be low. But look for a change near the end of the year, first of next year. That may change market dynamics if the Fed allows interest rates to rise.  Have a plan to exit the market if you're still fully invested. And not just equities. Watch bond prices. As the Fed tapers is bond purchases, the upward pressure on

"Build America, Buy America" Is Bad Policy

By Allison Schrager Bloomberg Opinion Printed in Stars and Stripes The infrastructure bill moving through the Senate takes more than 2,700 pages to lay out $1 trillion in spending. Many aspects of the plan will be popular. Americans love infrastructure; who doesn’t want nicer airports, roads, bridges, clean drinking water and access to cheap broadband? In theory at least, we not only enjoy better infrastructure, it’s an investment in our future — making the country safer, more resilient and boosting growth. But many of the potential economic benefits will be undermined by the nearly 60 pages of the bill dedicated to “Build America, Buy America.” Buy America requirements have been around since the Great Depression and are often a feature in U.S. infrastructure plans. They require that government-funded projects use domestically produced materials and are completed by American firms with American workers. This latest incarnation is similar to others before it. There are, of course, many

Market Review: What Should You Do?

In my opinion, there is nothing to do. If you're a long-term investor and you have a plan, and the plan is still valid, I wouldn't change a thing. Based on a chart of the NASDAQ, there is no indication of a change of trend. The DJIA and SP500 look similar.   My portfolio allocation is: 40% Bonds, 30% Energy Stocks and MLPs, 18% Percent Large Cap Stocks; 10% REIT, and 2% Cash. The portfolio earns about 5.2% of market value in dividends.  Note: My portfolio is heavy in energy because 1) I know the industry, 2) there is good potential on the upside in the next three years, and 3) the dividend earnings are between 4% and 5%. I do not recommend this for everyone. Know what you invest in. 

Market Pauses, But For How Long?

Stocks slipped on Tuesday and Wednesday morning following a drop in retail sales, which fell 1.1% in June, driven largely by a slump in car sales. Earnings reports from Home Depot ( HD ) and Walmart ( WMT ) didn't help investing sentiment either amid flattening revenue growth and slowing e-commerce trends. The retail bonanza continues this morning with earnings from Target ( TGT ), Lowe's ( LOW ) and TJX Companies ( TJX ). Fed minutes: Not a day goes by that there isn't some action, with the catalyst today being the Fed's most recent policy meeting. The minutes may show discussions about tapering monthly bond purchases, or just how divided FOMC officials are on the debate. Yesterday, Fed Chair Jerome Powell said the pandemic is "still casting a shadow on economic activity," and stock futures wavered around the flatline overnight as investors continued to size up the market. The bulls: "We remain bullish on stocks (particularly cyclicals/value) thanks to a

Biden Urges OPEC to Pump More, But Not American Producers

Update Aug 16, 2021: OPEC+ sees no need to meet U.S. call for more supply (Reuters) .  While the administration begs overseas adversaries to ramp up oil production with jobs and development to the benefit of foreign citizens, Americans remain handicapped by Democrats’ zealous animosity towards fossil fuel extraction on domestic land. Just after assuming office, Biden announced last week a range of executive orders aimed at addressing climate change and starting the process of phasing out fossil fuels, a promise he made on the campaign trail. As part of the orders, all new oil and gas leasing on public lands was indefinitely paused to allow time for a “comprehensive review and reconsideration of oil and gas permitting and leasing practices.” The review will also consider adjusting royalty fees for oil and gas, which are about $2 an acre and haven’t been updated for decades. The order does not apply to tribal lands.  Underneath the tundra surface of Alaska’s North Slope sits an estimate

Consumer Sentiment Collapses, More Details on Inflation

In a stunning reversal of optimism amid growing fears of the Delta variant hitting the economy, the Reuters/University of Michigan Consumer Sentiment Index plunged 11.0 points in August to 70.2, far below the consensus of 81.3. It was the lowest reading since December 2011, blowing past the pandemic low of 71.8 reached in April of last year. Excluding the pandemic, this was the biggest monthly drop since October 2008.  In fact, there have been only four other instances since 1978 of declines of at least this magnitude: December 1980, August 1990, September 2005, and October 2008. Except for the 2005 case, all were associated with recession. This doesn’t mean that the economy is headed in the same direction today, but it does raise the risk of consumers disengaging from the economy for fear of the virus which would reduce the momentum of the broader expansion. On a y/y basis, Sentiment is off 5.3%, also historically consistent with a moderation in growth. Inflation expectations remained

The Poor Performance of Education, Part 2

I previously broached the subject of school performance a couple of days ago here . While funding per student has gone up five times from 1970 to 2010, test scores remain stagnant. I ronically, despite the United States having the second-best education system globally based on number of students who graduate and go on to higher education, it consistently scores lower than many other countries in benchmarks such as math and science. According to the Business Insider report in 2018, its education ranking was 38th in math scores and 24th in science. The United States' education rankings have been falling by international standards over the past three decades. It's not just math and science that are victims to our public school system.  Recent surveys show that young Americans know little about their own country, other than they hate it.  A new YouGov poll asked more than 1,000 people aged 14 and up about their knowledge of the country's history and institutions, and their patr

Hospitals Overwhelmed? Why? Data Shows They Should Not Be

Recent reports of hospitals once again being overwhelmed or stressed because of Covid-19 cases are somewhat suspicious. Data from the CDC as of Aug 7 show that this should not be the case. But the devil is in the details.  Only 9 percent of hospitals are under high or extreme stress, according to NPR.  While hospitalizations have been rising in recent weeks, they are no where near the level of last winter. (CDC Data). Many hospitals trimmed staff and costs this year in an effort to remain profitable, according to the Wall Street Journal.  The mainstream media are not painting an honest or accurate picture of what's going on. 

The Poor Performance of Education in the United States

Forget Critical Race Theory. U.S. Public Schools are an abject failure. In spite of more and more money, results have not improved.  Oregon Gov. Kate Brown privately signed a bill last month ending the requirement for high school students to prove proficiency in reading, writing, and arithmetic before graduation. Brown, a Democrat, did not hold a public signing or issue a press release regarding the passing of Senate Bill 744..., an unusually quiet approach to enacting legislation, according to the Oregonian. ...The bill, which suspends the proficiency requirements for students for three years, has attracted controversy for at least temporarily suspending academic standards... Backers argued...the new standards for graduation would aid Oregon's "Black, Latino, Latinx, Indigenous, Asian, Pacific Islander, Tribal, and students of color." ...Republicans criticized the proposal for lowering academic standards. "I worry that by adopting this bill, we're giving up on o

Signs of Inflation Peaking, But Still Highest Since 2008.

I love the way the U.S. government reports inflation. Its core numbers leave out energy and food, which have to be large budget items in the average person's budget. Let's look through the numbers for the Consumer Price Index, which were reported yesterday, Aug 11, 2021. The Consumer Price Index (CPI) increased 0.5% in July, in line with the consensus, and the smallest gain in five months, as broad price growth moderated. Food prices rose 0.7%, the second most since April 2020. Food away from home spiked 0.8%, the most since February 1981, as greater demand for dining out strained the capacity in the restaurant industry which has been dealing with labor shortages and rising costs, including wages. Energy prices picked up 1.6% Core CPI, which excludes food and energy, increased 0.3%, the least in four months, and below the consensus of 0.4%. Shelter prices rose 0.4%, accounting for over half of the increase in the core. It was led by another near-record surge of 6.0% in lodging

SEC Approves Diversity Proposal

  From National Law Review SEC Approves NASDAQ Board Diversity Proposal Over Significant Dissent Monday, August 9, 2021 The SEC recently approved two proposals by NASDAQ concerning board diversity. Specifically, the proposals would "require each Nasdaq listed company, subject to certain exceptions, to publicly disclose . . . information on the voluntary self-identified gender and racial characteristics and LGTQ+ status . . . of the company's board" and to "require each Nasdaq-listed company, subject to certain exceptions, to have, or explain why it does not have, at least two members of its board of directors who are Diverse." The proposal would also "provide certain Nasdaq-listed companies with one year of complimentary access for two users to a board recruiting service, which would provide access to a network of board-ready diverse candidates for companies to identify and evaluate." ( ) The thr

A Tax By Any Other Name: How Inflation Is Robbing You Blind

by E.J. Antoni Texas Public Policy Foundation CNBC recently published an article whose original title demonstrated a fundamental misunderstanding about inflation. The wording was so misinformed that it prompted intense criticism and CNBC changed the article’s title. It originally read “The upside to inflation: rising wages” and was changed to “It’s not certain rising wages will be enough to outpace inflation.” Ironically, after posting a critique of the CNBC headline, Fox Business posted its own article with an equally misinformed headline: “Inflation inflicting near-term pain, but promises long-term gain for seniors.” These headlines misconstrue the fundamental mechanism that causes inflation. As Milton Friedman frequently said, inflation is always and everywhere a monetary phenomenon. Inflation occurs when the amount of money in an economy grows faster than the growth of goods and services in that economy. The ultimate power to create fiat money lies with America’s central bank—th

A Short Primer on How Capitalism Works

By Dan Mitchell International Liberty People who want more government spending generally have both a short-term and a long-term argument. In the short-term, they assert that more government spending can stimulate a weak economy. This is typically known as Keynesian economics and it means temporary borrowing and spending. While Keynesian economics may look good on paper, it is rarely practiced in the manner proscribed. During times of economic expansion, it calls for government reduction of spending and borrowing (actually, paying off debt). This never happens. In the long term, they claim that big government is an investment that leads to better economic performance. This is the " Nordic Model " and it means permanent increases in taxes and spending. In many ways, the debate about short-term Keynesianism is different than the debate about the appropriate long-term size of government. But there is one common thread, which is that proponents of more government pay too much a

Federal Reserve Maintains Status Quo; Jobs Report

The Federal Reserve wants to see “substantial progress” in the economy before it makes any move towards removing accommodation. They haven't specifically defined what that is, but they'll know it when they see it. But if Fed Chairman Jerome Powell has used his press conferences for anything, it's to hammer home the point that he's still very concerned about the labor market, one-half of the Fed's dual mandate. “I'd say we have some ground to cover on the labor market side,” Powell said after July's decision dropped. “I think we're some ways away from having had substantial further progress toward the maximum employment goal.” Jobs Report U.S. nonfarm payrolls added 943,000 jobs in July after a gain of 938,000 in June. The July gain is the seventh in a row and 14th in the last 15 months, bringing the seven-month gain to 4.318 million and the 15-month post-plunge recovery to 16.660 million. This is still well below the 22.362 million combined loss from Mar

Eviction Moratorium Has Expired. Oops. Not Yet.

Update on Aug 5: The moratorium was extended by the CDC, against a ruling by the U.S. Supreme Court.  Landlord Group Sues CDC Over Eviction Ban Extension  The eviction moratorium expired on Saturday, July 31. There has been plenty of speculation about what will happen now, but I don't think anyone is absolutely sure. It could spark an economic nightmare, but is getting little to no coverage in the mainstream media.  In March of 2020, Congress passed the Coronavirus Aid, Relief and Economic Security Act (the so-called “CARES” Act) which included an eviction moratorium preventing landlords from evicting tenants who were delinquent in paying their rent. The national moratorium has been challenged in several courts and its expiration date has been extended four times. It currently expired last Saturday, July 31, and federal officials (including President Biden) have indicated there are no plans to extend it again, though there are those in Congress who wished to have it extended (AOC,