The Urge To Splurge is Still Strong

“When wealth is lost, nothing is lost; when health is lost, something is lost; when character is lost, all is lost.”

— Billy Graham

The second mass shooting in May.

What’s wrong with people? The shooting happened in an otherwise normal middle class neighborhood in Texas. Matthew McConauhey lives there. Okay, so not so normal.

Sure, we hear the gun lobby. Let’s ban guns. Fine. That doesn’t change the fact that the person using the gun, each time, is demented. Who shoots kids?

“There’s something sick in that guy’s mind,” a colleague said this morning. But that doesn’t seem to capture anything useful about the tragedy.

It’s hard to write about economics or the markets when kids are being murdered at school. Maybe we should get some of the money back from arms deals in the Ukraine and arm our teachers and kids instead.

Connecting dots between politically charged events is not helping much today.

“The market doesn’t care about you,” our guest from last week Nomi Prins said on several occasions. “It doesn’t care what side of the political aisle you are on. It only cares about the money flow.” That might sound crass, but I can assure you that after late night wine discussions Nomi is not particularly aligned with our political views.

My guest for the Wiggin Sessions this week, #1 ranked economist at Bloomberg, Andrew Zatlin has a knack for looking at the right data for ignoring the noise in the mainstream news and for finding money flowing into certain stocks.

“We just talked about all gloom and doom,” Andrew warned during our conversation, “and getting ready for the downturn. What’s interesting is how the consumer responds to this. Right now, the consumer’s feeling the urge to splurge. Consumers are still happy.”

We don’t know how much longer that’s going to last. But it’s worth keeping in mind while we parse through the news cycle. Zatlin call’s it his “vice index”:

“The latest retail data has been showing this. And people would say well, that doesn’t make sense. Dig in a little bit. I came to the vice index because if you were until recently, looking at discretionary spending… Meaning, how much money do I have as a consumer, to spend? And what’s my proclivity to spend it? What I found is, again, to go back to the basics. The way it was being tracked… No. It doesn’t make sense anymore. If people feel like they’ve got mad money in their pockets, what do they do? They go out and they booze it up. They go gambling.

They might go find an escort. There are different places where money gets spent. And so what I found was, I could track this mad money spending in a different way. By looking at vices. It’s a form of luxury spending. If you’re an economist and you hear about luxury spending, you get excited. Because luxury spending is the tip of the spear, for discretionary spending. People go out, and they go… Remember Cigar Aficionado magazine? Okay. Those were classic, boom days. Literally. Taking a $20 cigar, and setting fire to it. I mean what more statement of, I can just burn my money. Right? We go through cycles like this. And so, you find these places where people are just willing to throw their money away. NFTs, for example. Notice how the NFT market has collapsed? It was mad money.

Mr. Zatlin looks at vices cutting across every socioeconomic demographic.

“You want to talk about drinking? Guess what? Once you’re 21, it doesn’t matter whether you’re rich or poor. Black or white. Jewish, Christian… Well, Muslim you can’t say. They don’t drink. But you get the idea. I mean, alcohol consumption cuts across every socioeconomic place. Gambling, same thing. If you’ve ever been to Vegas and you look around, young, old. Chinese, Hispanic.

“Doesn’t matter. The better part about tracking these vices… Luxury. How do you track that? Is that Louis Vuitton sales? Is that Tiffany sales? How do I track that? Whereas, I can track cannabis consumption. I can track escorts. I can track alcohol consumption. And I’ve been able to do it and synthesize it in a way where you can say, wow.”

For now, the vice index shows we’re still fairly confident about the next couple of months.

We’ll see how the negative news cycle and Fed policy play into sentiment in the meantime. Our view: The distortion between the market and the economy are even greater than what Nomi was talking about last week.

I’m getting wary. Something’s not right with this market. Benevolence to the professionals in the news business or no.

Follow your bliss,

Addison Wiggin

Addison Wiggin
Founder, The Wiggin Sessions

P.S. Andrew’s discussion of the “vice index” is worth paying attention to by itself. Frankly, I was surprised that his own sentiment was as positive as it came off.

But Andrew is a data guy. His thesis behind Moneyball Economics is simple: the data tells the story. It’s what propelled him to be a leading prognosticator at Bloomberg for several years. Listen to our chat here:

Click here to learn more

Click here to register for Andrew Zatlin’s special presentation on Crash 2002, Tuesday May 31 at 1:00pm EST.

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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