Notes From All Over -- Late Afternoon Edition -- "3386" -- August 12, 2020

3386: the number the S&P "needs" to set an all-time record. Later: new record.

Big story: with regard to the market yesterday / today, the market was up by a huge amount going into the last trading hour when it collapsed. 

Today it came back stronger than ever, and now in the last hour of trading it looks like it will hold. So, what happened? Yesterday the market was on a tear until Mitch McConnell, near the market close, said "stimulus" talks were at a stalemate. Today, it appears no one cares about Mitch McConnell's statement. Instead, it was Tesla, announcing a 5 - 1 split. And then this: amazing how much time talking heads spend telling us that splits make no difference. They don't understand human behavior. By the way, if that is a correct reading, it suggests that the market likes the federal government spending money and/or sending large amounts of money back to its citizens. If so, the market should love Biden/Harris.

Stimulus talks: SecTreasury Mnuchin invited Schumer/Pelosi to meet with him. The latter said, "no." Hmmm......that speaks volumes. Let's see if that "stimulus stalemate" statement at 3:15 p.m. EDT, 44 minutes before the market closes, will cause the same market collapse it caused yesterday. 

[Rumor: Senator Schumer wants a pony for every American; Congresswoman Pelosi wants an ice cream freezer for each American. Trump just wants two chickens in every pot and funding for his bust on Mount Rushmore.]

Politics:

• 2020 presidential election: investors are in a win-win situation; more on this later;

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

The big fumble:

MarketWatch op-ed, linked from The WSJ: as Big Ten and Pac-12 cancel their football seasons because of Covid-19, college sports programs are facing a financial apocalypse.

• Revenue is disappearing (not decreasing, but disappearing) but debt cots, fat coaching contracts are not;
• it won't be just "college sports programs" but the entire college/university system; in fact, one begins to wonder how broad this setback could be
  

The Wizard of Oz strawmen: see this post over at PowerLine. I disagree. 

I can't speak for college students in general, but based on surveys reported over on sports-talk radio, the college football players wanted to play football this fall. It was the university lawyers that said, "no."

America's students are not cowardly (as PowerLine said); their leaders are. And we've seen this over and over and over. 

Egg shortage: remember that egg shortage early in the pandemic.

I did not understand it. I tried to explain it, as did readers. There may have been a relative shortage that lasted a few weeks, but it was quickly "fixed." One company, apparently, "fixed" it better than others. The NY attorney general is going after Hillandale Farms for price gouging during the "egg shortage." Google for link. 

Market: we'll know in a couple of hours whether the market sets any new records. It appears we would have had a significantly higher Dow close today except for Boeing. It accounts for most of the lag on the Dow.

• 10 of 11 sectors lagged today; only sector lagging: banks
• BA (Boeing: down 3%; down over $5/share
• BK: down about a percent; down 31 cents
• AAPL: up an astonishing $15; up over 3%; on no news that I could see; pulled up by Tesla?
• SRE: up over 2%; up almost $3/share
• but my favorite stock to watch right now, UNP: up about a percent; up $1.89; UNP hit an intra-day 52-week high; should close at an all-time high; 
• QCOM: up over 6%; up almost $7; trading at $115.54; pays 2.39%

Economy:

• everyone is calling this a recession; I think we need two consecutive quarters of negative growth, which, I think. means we have to wait one more quarter to officially call it a recession, but I could be wrong;
• some are calling it a depression, and based on "wiki's" definition of a depression -- based on number of Americans out of work and length of that unemployment, an argument could be made that we are in a depression:
• if so, SecTreasury and the Fed chairman deserve most of the credit for making the American economy look like neither a recession nor a depression; the US Congress deserves some credit, as does the president for distributing large amounts of money across the US;
• most agree that "Main Street" will get worse before it gets better; we have yet to see mass closings of local mom-and-pop restaurants; permanent closures of many stores whose major revenue comes from mall locations; and, large-city-budget disasters; landlords could be in deep trouble but they are so "spread out" we may not hear about it until the data is aggregated by someone;
  
• now, add in a few small cities, like South Bend, IN; College Station, TX; Iowa City, IA; Lincoln, NE; West Lafayette, IN; Eugene, OR; Corvallis, OR; and, Pullman, WA (all small towns that host Pac-12 or Big Ten football teams)
• speaking of which: how do you think colleges and universities pay for their social science, art and music departments, and STEM courses? 
• a double whammy for football-centric colleges and universities: empty dorms, empty cafeterias, empty bookstores (though they were already dying -- think Amazon); huge sources of revenue;
• colleges and universities won't be able to increase tuition / fees when students are staying home, taking courses on-line
• big donors see winning football programs as winning universities; look for donors cutting back;
  
• but while "Main Street" gets worse, "Wall Street" continues to hit all kinds of records; whether "Main Street" eventually catches up with "Wall Street" (i.e., the market corrects bigly once large cities and small cities start failing) is an unknown;
  
• I give it another six months but right now it appears Americans have really hunkered down; more money than ever is in savings; and credit card debt, at least until recently, is declining
• credit card debt:
• impulse buying: not happening
• gasoline, automobile maintenance, auto insurance, in fact all auto-related expenses have come down dramatically
• dining out: not happening
• airline travel: not happening
• after that, what do Americans use credit cards for?
• when this is all said and done, it will be obvious (again) that a Republic or a federation of states make a lot more sense than one central national clearing house calling all the shots; 
• bottom line: a sideways-Y shaped recovery; much of the economy will see a V-shaped recovery; but, much of the economy will reflect a relative flat-line "recovery"