- What the hell, Drudge Report?
- When Uncle Sam’s spend-a-thon…
- … Just ain’t enough
- Americans: Too scared to spend
- Unemployment horrors revisited
- Social Security contributions stall
- Swell Big Tech earnings (impervious to virus?)
- A beery special delivery in Chicago
- Kicking “two cans” down a finite road.
Before we get down to our usual order of business today, we have an unusual request.
For lo these many years, your managing editor’s rigorous process of content selection for this e-letter has included a morning visit to the Drudge Report.
It’s not just that Matt Drudge has been the premier internet news “aggregator” for more than 20 years; we also figure his website is a window into the media consumption habits of our “typical” reader. (We don’t want to typecast anyone, but given how we reach 275,000 people a day, we have to start somewhere.)
If Drudge has something that we in the media biz call a “water cooler story”… something people are liable to chat about… well, that sometimes inspires us to pursue our unique 5-ish take on the story.
But we suspect Drudge might be losing some of our “typical” readers as his editorial stance has shifted in recent months.
The reasons behind that shift are as inscrutable as Drudge himself; there’s widespread speculation it’s somehow tied up with his decision to switch advertising reps last summer. Folks on Twitter have jumped to the conclusion he’s sold the website outright, but there’s scant evidence to support that claim.
Whatever the case, we want to know: 1) If you’ve been a Drudge reader, are you still? 2) If not, what have you turned to instead? Drop us a line at this email address. Your answers will help keep these daily missives as engaging as possible.
So Uncle Sam’s spend-a-palooza to date isn’t enough, says Federal Reserve chairman Jerome Powell.
Remarking yesterday about the $2.6 trillion in spending already passed into law, Powell said, “Will there be a need to do more though? I think the answer to that will be yes.”
It’s a tacit recognition the Fed is “out of bullets,” as the saying goes. Interest rates are at zero and the Fed is blowing up its balance sheet at unprecedented levels. Monetary policy can’t do much more at this point; fiscal policy has to do the heavy lifting if there’s going to be any “stimulus.”
Or as this morning’s Wall Street Journal sums up, “Mr. Powell cautioned that low rates would be of little help until the virus was brought under control. Low rates also won’t help, he said, if banks and other lenders weren’t willing or able to extend credit to households and businesses, offering a defense of the Fed’s unprecedented expansion to backstop more debt markets.”
Actually, it’s much worse than Powell or the Journal lets on. Even fiscal policy isn’t having the desired effect.
Our Jim Rickards points us to a poll this week from Axios/Ipsos — asking more than 1,000 Americans how they were spending their $1,200 relief checks. Turns out 38% put the money into savings, 26% used it to pay down debt and 18% planned to spend it but hadn’t got around to it yet.
Whoops, that wasn’t the idea. “The patterns show that much of the stimulus funding was not spent on new purchases from businesses,” the Washington Examiner says drily.
Those numbers are even more extreme than a UBS Research survey last week — also showing that people are reluctant to go out and spend and “do their part to revive the economy”…
Thus, one of the major economic numbers this morning is no surprise. Consumer spending plunged 7.5% in March — way more than the 4.5% drop estimated by the “expert consensus” among dozens of economists polled by Econoday.
Indeed it’s the biggest monthly drop in records going back to 1959… and the shutdowns didn’t even begin till the middle of the month.
Meanwhile, it being a Thursday, the other major economic number of the day… is another big bar on our little chart of horrors.
First-time unemployment claims for the week ended last Saturday totaled 3.8 million. The good news is that’s the fourth-straight weekly decline. The bad news is also old news by now: Each of the last six weeks demolishes all previous records going back to the late 1960s…
That’s 30.3 million claims over the last six weeks, out of a labor force of 162.9 million. That translates loosely to an unemployment rate of 18.6%. The actual unemployment rate for April is due a week from tomorrow.
At the risk of belaboring the obvious… more people lacking jobs means fewer people contributing to the Social Security system.
“We are going to lose a lot of payroll tax revenue this year,” says Alicia Munnell, director of the Center for Retirement Research at Boston College.
At the same time, “expenditures keep at their regular pace, if not at an immediately higher pace,” she tells MarketWatch, “because older people who can’t find a job might turn to claiming early.”
Last year, estimates were that Social Security’s “trust fund” would be depleted by 2035 — necessitating an immediate 25% cut in benefits. Munnell figures the present crisis shortens the timeline to 2033. (Just in time for the first wave of Gen Xers to reach full retirement age, wouldn’t you know…)
Whenever our “leaders” get past the immediate crisis, you can count on them getting to work with some sort of Social Security “reform.” You might want to review an episode of The 5 from late last year, heralding “the end of Social Security as we know it.” Consider it a preview of coming attractions.
Another preview of coming attractions — higher state and local taxes to make up for cratering revenue. In his annual budget proposal, Nashville Mayor John Cooper proposes a 32% property tax increase.
“The city has thinned its cash reserves to a point where we find ourselves without a rainy-day fund during a stormy season,” Cooper says. “This is a crisis budget – not a discretionary budget – that will ensure Metro and Metro Nashville Public Schools can continue to meet our community’s needs.”
Reports the city’s CBS affiliate, “A homeowner would pay an extra $750 a year for a $300,000 home.” Well, assuming the homeowner can keep up mortgage payments and isn’t foreclosed on, right?
The city council has to approve a budget sometime in the next two months. If this is what’s happening in one of the boom-story cities of the 2010s, we cringe at the thought of what’s coming elsewhere…
Once again, the biggest tech names are shoring up the rest of the stock market today.
At last check, the Dow is down nearly 1% and the S&P 500 is down nearly three-quarters of a percent… but the Nasdaq is only slightly in the red. That’s because Microsoft and Facebook have turned in dandy earnings numbers, coronavirus be damned. (We might have more to say about this phenomenon tomorrow — after Apple and Amazon report.)
Gold is selling off, but still holding the line on $1,700. Treasuries are rallying, with the yield on a 10-year note at 0.6% on the nose.
Crude? Just another day of massive swings, a barrel of West Texas Intermediate up more than 20% to $18.15.
OK, it’s not as innovative as the strip joint that’s having its dancers deliver food in pasties… but it is another lockdown workaround.
While liquor stores remain open in most places, breweries with public areas to sample the wares are not.
Enter Chicago’s Goose Island Brewing Co. — “which has dispatched a black van to roam the streets of Chicago Thursday through Sunday, playing ice cream truck music,” according to the Eater Chicago site. “If customers call the phone number displayed on the van, the van will deliver beer to them.”
See the beer van, get thirsty. The power of suggestion!
“Alas, you can’t buy beer directly off the van the way you can buy ice cream from an ice cream truck,” adds The Takeout site, “but if you call the number displayed on the side, someone from Goose Island will deliver the beer to your door.”
The key is you have to actually see the van in your ‘hood, though. As someone wrote on Reddit, “I’m also a moron and realized too late that the message ‘Please only order if you can see the van’ doesn’t mean ‘If you can see the image on the website’ it means if you see it on your street.”
An understandable mistake. These are desperate times…
“Kick the can,” reads the subject line of an email from a longtime reader who’s become a regular correspondent while under lockdown in Idaho.
“Relying on the Fed, following their advice without considering the consequences is foolish and irresponsible. After all, the Fed's purpose is to control interest rates, manipulate the money supply, enable as much debt as it takes and keep the banks afloat, at all costs. They are not necessarily ‘wrong’ from their perspective, but that perspective is myopic and narrow and focused on the very short term. We trust our government to remain calm and to consider all of the consequences, from many perspectives, and to take into account the unintended consequences, including over the long term. That trust appears to be misplaced.
“Our response to COVID-19 is very similar. We have decided to trade fewer deaths now for more deaths later. Not from the virus but from the unprecedented steps we took. The NIH, like the Fed, has a single focus – control the virus, manipulate its effects and shut things down for as long as it takes. Fauci himself has said that he knows nothing about economics, for example. They too are not necessarily ‘wrong’ from their perspective, but that perspective is myopic and narrow and focused on the very short term. We trust our government to stay calm and to consider all of the consequences, from many perspectives, and to take into account the unintended consequences, including over the long term. Again that trust appears to be misplaced.
“Only now are a few lawmakers beginning, meekly, to question unlimited spending and endless lockdown. But it may be too late. Where were they when we made shutdowns and lockups mandatory rather than voluntary? When we bought into the absurdity that no one will suffer financially? That we could somehow sustain trillions in additional debt?
“Kicking these two cans down the road, debt and death, was politically expedient. But at some point, the can gets too big to kick. And we run out of road.”
The 5: The following meme of a Venn diagram was going around the web a couple of weeks ago. Substitute “The 5” for “Me” and it’s a good representation of where we stood.
I’m still in this camp, by the way — going out little, masking up when I do. Ditto for my wife, who quickly spun up an extensive protocol for disinfecting packages, groceries and whatnot.
After the initial shock in mid-March wore off, The 5 was quick to mock the “experts” who didn’t see a pandemic coming but instantly pivoted to a shut-it-down-yesterday stance.
But with another few weeks’ hindsight, guess what? The experts who did see it coming — including one we cited way back in mid-February — are starting to look more and more like cranks. Their dire even-if-we-lock-down projections have not come to pass. And folks are discovering their track record isn’t so hot. (Turns out the fellow we cited in mid-February once anticipated as many as 200 million deaths worldwide from a 2005 bird flu outbreak. The actual total was 440.)
So here we are now, with control freaks and power trippers citing “science” to justify the most absurd and arbitrary measures.
When they and their kind were saying in mid-March, “The world has changed forever” and “We’re never going back”… you could almost sense a certain glee, no?
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. And don’t forget… The “experts” are anticipating 18 months of on-and-off shutdowns.
Can we as a society possibly withstand that? Of course not. Prepare accordingly.
