Week of October 11, 2020

October 12, 2020


Stuff I read that gets stuck in my head

The town stood in its own shadow of better times, when families depended on agriculture for their livelihood, on work for exercise, on common sense for intelligence, on each other for entertainment, and on faith for health.  Seasonal rhythms of nature had permeated every aspect of living and everyone, in one way or another, had danced to the same fiddler.  Shared ethical standards fought crime, and inexorable obligations linked individuals together in a single, unbroken human chain.  Rhodes, D. 2008. Driftless

Human Tribe & Ingenuity

People working better together and inspiring each other

Recycling the cruise industry, literally.  Cruise ships are being dismantled in Turkey for scrap metal.  Humans adapt, it’s what we do. Cruise Ships Dismantling Booms

Black Swans & Other Market Tidbits

What is on the horizon that could trip us up, or lead us up

Google searches for a specific Presidential candidate has predicted the winner 100% of the time (granted, it’s a small sample size of four elections).  Currently Trump leads Biden by a large margin in Google searches.  https://www.superhighway98.com/elections

Semiconductors the new copper?  The old saying that, “every bull market has a copper roof” meant that as copper prices (for electrical and manufacturing) went up so did the market.  Today semiconductors replace copper as an indicator of how the economy is performing.  No longer just in computers and smartphones, semis are in everything.

COVID recovery?  The most recent air passenger traffic totals are increasing week over week and just hit their post pandemic highs.  Additionally, as large companies announce furloughs and job cuts, small and medium companies continue to hire.  Unfortunately, this still leaves very small owner-operator companies behind.

Utilities attractive.  With many still working or schooling remotely, even as industrial and commercial demand returns to pre-COVID levels, residential kWh demand should remain elevated.

Slowing employment gains.  September’s jobs report shows a decline in additional new jobs.  It was the smallest margin of hiring since the economy reopened.

Don’t fight the Fed.  On Monday, Fed Chair Powell said, “By contrast, the risks of overdoing it seem, for now, to be smaller, Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”  Look for stimulus at some point, probably after the election.  That should continue to drive the stock market, and inflation at some future date.

Banks unattractive.  During the pandemic banks are hurting not only through reduced credit demand, but many of their assets are suffering a downgrade in quality as borrowers (like landlords) find it difficult to pay their loans.  Additionally, the Fed has put additional measures on the banks (like prohibiting share repurchases) to preserve bank capital and making the banks less profitable.

Housing on fire.  Home values just had the largest increase in two years.  The main drivers were a large spike in first-time homeowners (welcome to the game, Millennials!) and the exodus from the large cities.  There are also “green shoots” in the COVID mortgage bailout plan.  This plan allows homeowners to avoid monthly payments for up to one year.  Nearly 20% of participants in the program rolled out of the program in September.  So it looks like less homeowners are stressed financially.  Finally, the National Association of Homebuilders confidence in new single-family homes reached an all-time high in September.  That, with lumber prices increasing 170% since mid-April, is a good sign.

Housing Bubble Part II?  The 2005-2007 housing bubble was created with the packaging of mortgages during a time of plentiful housing supply.  Today, Collateralized Mortgage Obligations are a very small part of the market and we have a low-supply of housing.  It’s not 2008.

As always, we welcome your input, questions, and feedback.

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