SHI 3.24.21: The Talking Heads

SHI 3.17.21 – Letting it RIP!
March 17, 2021
SHI 4.1.21: Face North to Maximize Investment Gains
March 31, 2021

 

Here’s a shocker:   You  cannot  believe everything you read on the internet.  

Right.    You’re not shocked at all.    Everyone knows that.    Especially you:  My brilliant SteakHouseIndex readers!  🙂

By now, we all know much of the “stuff” found in cyberspace is total BS.   Many claims are simply outlandish.  But it’s a bit harder to make that distinction with numbers.  Especially large numbers.  Because we lack context.

Take this article, for example (right click, “open link in new tab”): https://www.businessinsider.com/billionaires-in-america-got-so-much-richer-during-pandemic-2021-3?campaign_id=4&emc=edit_dk_20210324&instance_id=28415&nl=dealbook&regi_id=78191365&segment_id=54076&te=1&user_id=383fe939c1d236fb3476a3be30d03e4d

The headline is stark and shocking:  Not the “America’s billionaires” part … no, I’m referring to the “more than 80 million people in the US lost their jobs” part.   More than 80 million people lost their jobs during the pandemic ???   Really?  Could this be true?   Or is the author just another moron dishing out numeric internet garbage simply because he or she can? 

I am compelled to investigate. 

 

Let’s talk numbers.

 

Because I’m one of “those people” who remembers numbers.   For example, off the top of my head, I just happen to know that the total number in American’s labor force is about 160 million folks.  Yep, if asked at a party, “Hey Terry, what’s the size of the total US labor force?,” I can accurately answer that question!   That’s right:   I’M  SO  MUCH  FUN  AT  PARTYS !!!  🙂

And since I know the labor force has about 160 million people in total, 80 million people equals about half the labor force.  Meaning, if this author is correct, about 1/2 of all employees in the US lost their job during the pandemic.   Which is complete BS.  The author is a moron. 

 

Welcome to this week’s Steak House Index update.

 

If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/


Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.  

But is the US economy expanding or contracting?

Before COVID-19, the world’s annual GDP was collectively about $85 trillion.  Then it shrank … then bounced back!   We can thank global fiscal and monetary policy for the bounce.   According the the Q3, 2020 ‘preliminary’ numbers, annual US GDP is back UP to about $21.1 trillion.   And still, together, the U.S., the EU and China continue to generate about 70% of the global economic output.  

 

The objective of this blog is singular.

 

It attempts to predict the direction of our GDP ahead of official economic releases. Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.


Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore related items of economic importance.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.


The Blog:

The bigger problem here is not that the author is a moron, but since the inaccurate statement is so staggering … so incendiary … the more “legitimate” (right, I’m not too sure what that means today) news sources begin to pick it up and repeat it.   Just this morning, Andrew Ross Sorkin, a very sharp and very experienced financial writer for the New York Times, repeated this BS in a news feed I get every day, stating:

 

HERE’S WHAT’S HAPPENING:  Speaking of inequality … The combined wealth of American billionaires grew $1.3 trillion during the pandemic, up 44 percent from the previous year, according to a new study. During that time, 80 million Americans lost their jobs.

 

… something we know to be complete bunk.    Prove it?   I’m happy to. 

Here is a screen shot of the most recent “Employment Situation Summary Table A” produced by the United States Bureau of Labor Statistics.   They are a reliable source, right?  Well, relatively anyway.  🙂

Does this data support the claim that 80 million folks lost their job? 

 

Nope … the number of “employed” persons fell from just under 159 million in February of 2020 to just over 150 million in February of 2021.   9 million people have lost their jobs.   This is bad — very bad.   But 9 million is a far cry from 80 million. 

Mr. Sorkin’s “feed” contained a few such nuggets.    Such as this internet “fact” I’ve seen a number of times lately:

 

A surge in individual traders — who have access to commission-free online trading apps, government “stimmy” checks and lots of downtime — has become one of the biggest forces in stock markets.

 

One of the  biggest  sources?   Really?   Again, total and complete BS.   Consider this:  Of the $1.9 trillion in the latest stimulus bill, about $410 billion will be paid out to Americans.  A recent Deutsche Bank survey that “stock traders” expect to “invest” 40% of their $1,400 check.   For the moment, let us assume that every single check recipient — 100% of these folks — puts 40% of their check into the stock markets.  40% of $410 billion is … do the math, carry the 1 … equal to $164 billion.   OK … that IS a lot of money.   But can this amount of money move markets?  Is this the cause of the run-up in the S&P500, the DJIA, the NASDAQ, etc?   Have we found the cause … this “BIGGEST FORCE” in the stock markets? 

Nope.

These markets have a combined capitalization of almost $51 trillion.    A trillion is equal to 1,000 billion.    So $164 billion isn’t even 1% … in fact it is only about 0.32% of the total market capitalization.   A veritable pimple on an elephant’s back.   Insignificant.   And remember:  I’m assuming 100% of the check recipients invest in the stock market. 

No, “stimmy” checks are not “the biggest force” in the equity markets.   They are close to insignificant.   But internet stories would have you believe “stimmys” are pushing equities higher, creating a “bubble” … with a crash soon to follow.   Naah. 

A bigger, more complex and perplexing question is that of the “consumer” inflation impact of the latest stimulus bill combined with the post-pandemic supply chain disruptions.   Chairman Powell remains steadfast in his comments, yesterday repeating:

“We might see some upward pressure on prices. Our best view is that the effect on inflation will be neither particularly large nor persistent.

Got it.   But remember:  The FED strips out “food” and “energy” costs when they talk about inflation.   So … the FEDs view on consumer inflation is different than the perspective of the “man on the street” so to speak, where inflation expectations are borne.  Expectations are up, slightly, but not by much.   The jury remains out on this one.

Here’s another angle:   Are supply chain problems already causing “producer” inflation? 

Yep.  Consider comments from General Mills, a global food brand, in their quarterly financial results released earlier today:

“Adjusted gross margin decreased … driven by higher input costs, including input cost inflation, costs to secure incremental capacity, and higher logistics costs….”

Higher input costs.  Input cost inflation … higher logistics costs.   Ultimately, if these problems remain persistent, companies like General Mills will begin to pass along their cost increases to the consumer.  If they can.   Their problem is not unique … this is a familiar story today.   Supply chain across the globe are stressed and in many cases, broken.   The Suez Canal “clog” doesn’t help.  🙂

So when we add potential supply-chain-triggered consumer product inflation with another $1.9 trillion spending bill … one must remain somewhat concerned about rising consumer inflation.   I certainly am. 

 

 

Speaking of cyberspace, real estate has always been an intriguing investment to me:   The real stuff … the stuff you can live in.   But have you ever considered ‘digital‘ real estate?  Yes, according to Janine Yorio, you can now buy “digital” land in the “metaverse.”   Metaverse … hmmm … sounds familiar ….  Right:  I have it — did you ever read ‘Snowcrash‘ by Neal Stephenson?   If not, you really should … because this is quickly becoming a “thing.”   Not only is the book excellent … but apparently, like NFTs, the metaverse is jumping from the pages of fiction into reality.  

What is digital real estate?  Per Janine:  “Digital real estate exists inside virtual worlds, each its own “digital nation” with a system of clearly delineated, irrevocable property rights. Buying land today in virtual worlds feels a lot like buying land in Manhattan back in 1750.”

Maybe.  But in 1850, much of Manhattan real estate was worth about the same as it was 100 years prior — close to nothing.   Way back then, location drove value … just as it does today.   Perhaps “property values” in this budding metaverse are easier to navigate than NYC real property? 

You think I’m making this up?   Naah.  (right click, “open link in new tab”)

https://www.coindesk.com/here-comes-the-virtual-real-estate-boom

Me?  I’m heading in the opposite direction.  I’ll stick with real real estate.  Not the fake stuff.  Caveat emptor, my friend.  

The bottom line:   The talking heads get paid to talk and get attention.  They are  not  paid to be accurate.  Take all internet-sourced “data” with a grain of salt.   Assume everyone has their own agenda.   If the ideas or numbers sound sketchy, they probably are.  Do your own research  before  acting on the comments from talking heads.  Morons outnumber Nobel prize winners by a wide margin. 

Be careful and good luck out there.  🙂

  • Terry Liebman

Comments are closed.