Tuesday, March 31, 2020

It must be an election year

Because everyone that isn't getting a bailout is getting free government money!

Today, just days after the government reallocated $6,000 of your future tax payments to various corporations and back to you in the form of a $1,200 payment, word must have reached Washington that you still have some extra money kicking around in a can somewhere.

In light of some staggering GDP estimates for the second quarter (ranging from -9% to -34%) the White House and Congress started clamoring for a new $2 trillion infrastructure program.  So, yeah, that vacation you were going to take in 2021 and 2022, no the government will be needing that money to give it to contractors building a Second Avenue subway, a new JFK airport or maybe a $500 million port of entry in Cape Vincent for the Wolfe Island ferry.

Hey, of all the things we can spend on
a) bailouts
b) tax cuts
c) infrastructure

I'll chose C all day long.  The problem is that we just wasted $1.7 trillion on a corporate tax cut that went up in smoke, now we are gifting $2 trillion to our corporate overlords and while we are at it, sure let's give the notoriously efficient contracting industry $2 trillion to waste on bridges and tunnels for a world where commuting might be a thing of the past.

The best analogy for this line of thinking is "Hey, I know I just lost my job, but you know what, we need to buy that second house up on the lake because it'll make me feel better and those sweet real estate commissions will boost the economy a bit."
Jim Grant has forgotten more about interest rate analysis than I'll ever know so when he speaks it is worth listening to him.  Unfortunately, because he is not a rah-rah cheerleader for the US markets you almost never see him on CNBC, but he was interviewed in a German publication today and it's worth a read if you have the time - Covid19 Unmasked an Essential Weakness in Finance.  These are a couple of the choice quotes....

"Covid19 unmasked an essential weakness in American finance which is owed to the past 10 years of artificially cheap credit." 

"Very low interest rates and easy access to leverage also sustained the unnatural lives of profitless companies that would otherwise not have been in business."

That's a very articulate way of saying what I've been preaching for the past decade.
Unfortunately, it doesn't seem that the severity of the situation is resonating with everyone in the US.  This graphic from FT.com is incredibly stark (and a little unnerving that google has this data).

This shows footfalls (basically people walking/running) in various parks around the world this past week and weekend relative to historical averages.  Note how in Europe the numbers are almost 0 relative to history.  In the US, while the weekend data showed a sharp decline (some of that could have been weather related) but look at the data during the week!  New York's Prospect Park was significantly busier all week than usual despite the fact that NY is ground zero in the COVID19 fight. 


I don't know how to get this message out - we can stay in and hope to get back to normal in a month or we will be fighting this disease in May, June and beyond.

FT Graphic: @jburnmurdoch

Quote of the day:  
Michael Krieger
Can we stop pretending we live in anything resembling a “free market.” Our economic system is socialism for Wall Street/oligarchs and Hunger Games for everyone else.

Daily dose of humor: 
"The hardest part about going back to the office will be giving up breakfast dessert"

"I call loading the dishwasher "quantum physics" because no one in this house can do that either".

"Friend: I'm just taking things one day at a time.
Me: [Not remembering what day it is or how time works] Totally, I was just saying that tomorrow."

Thanks again for all of the links/shares.  I appreciate it - feel free to drop me a note (blantier2 @ gmail .com) or follow along on twitter @brianlantier

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