Locator: 44836ECON.
Yesterday a reader sent me this:
.. and the reader's comment: "... another reason for the Fed to raise rates 50 bp in July.
My not-ready-for-prime-time reply:
You are absolutely correct. I was thinking the same thing.
With regard to the economy, I think my best blog to date is from Jun 22, 2023:
Journalists have to come up with a
headline, a catchy lede, a superficial article, fit the space allotted,
all against a 1:30 p.m. deadline for the "evening" edition" or a 5:30
p.m. deadline for the morning edition.
Or the 4:30 / 5:30 p.m. Friday night news dump knowing even if they're wrong,
- no one is going to read it; or,
- it will be forgotten by Monday.
And.
It's
interesting to see what conclusions business writers reach (within the
constraints above) based on a single speech by someone
who lives, breathes economics and has been in the business twice as
long as most of these journalists have been around.
And if you note the surname of
most of the journalists writing these articles about the US economy, most of them seem
unlikely to be Daughters of the Revolution or Sons of the Pioneers.
My
goodness, all these business writers and talking heads talk about is
the incredibly low unemployment rate, this really tight labor market,
which they suggest is the only thing that matters to JPow.
The
numbers today causing all the hand wringing? The weekly -- weekly, are
yo kidding me -- 239,000 actual vs 264,000 predicted, for initial unemployment claims.
[I
used to track the weekly unemployment claims -- did it for years --
I finally quit -- after seeing that those numbers had zero
correlation with my investing results. But I digress.]
Had the "number" been 265K (instead of 264K) the headline would have been: unemployment claims rise more than forecast; JPow and the Fed on the right track; inflation down; Bidenomics working.
And the market would have exploded on that headline. [It appears they didn't explode yesterday but will explode today.]
Instead
the number comes in at 239,000. [Population of Shanghai: 30 million.
One city. 239,000 is about a fourth of one million. Another 29 million
and you get Shanghai.]
The
US civilian labor force in May, 2023 was 166 million (that's the
official number; the
real number is probably greater -- prostitutes and gangsters probably
don't get counted -- and then add in non-civilian labor force.
264K-239K
= 25,000.
25,000 / 167 million = 0.00015 = 00.015%. And that's going to drive JPow to 50 bp?
LOL.
But that's what the 29-year-old journalists are telling us.
I
plan to use my June 22, 2023, posting as the basis for such postings
through the end of the year (updating monthly). Exactly the same posting
but editing to fit new data each month.
My thesis remains:
- the current inflation has little (do I dare say, nothing) to do with government spending or tight employment
- the current inflation is due to too few goods being chased by too much money
- exhibit A: a $35 million 1960's vintage fixer-upper on Lake Tahoe being sold with an asking price of $35 million
- exhibit A: the price of used cars
- too much money: "my two favorite charts"
- area under the curve;
- money market funds.
- too few goods:
- supply chain shortages
- fourth industrial revolution
For me, a Goldilocks economy.
If companies don't want to see their share prices go the way of General Mills, they better
do better with earnings; and, they better increase their dividends if
they don't want folks to
bail on stocks and put their money in money market funds. Every widow I
talk to is doing that and at my age, I talk to a lot of widows.
I'm
happy as a lark. Focused on dividends. Re-jiggering my portfolio to
reflect the fourth industrial revolution. Maintaining the #1
subscription-free, ad-free, password-free, daily blog on the Bakken with
literature and musical interludes to give it a bit of class.
Best "news": I have a monthly posting on the economy/investing that will need minimal editing.
