Wednesday, February 26, 2020

Odds and Ends: February 2020

Virus and the Economy

Apple became the first company to mention supply concerns due to the virus from China. They expect this to hurt their bottom line in this quarter. Apple was soon followed by many other firms. There are too many to list, however a case in point will give you a better understanding of the situation.
Home Depot: The home project store announced that the virus is having a big impact on this quarter's earnings and future outlook. Home Depot lists 114 Chinese firms that supply items the store needs for their shelves.

Two ways to view...

The list of suppliers to produce a product is fascinating, however it tells me the extent of lost jobs to just China due to outsourcing. This is why there is a shrinking middle-class and a overall lowering living standard in the US. It makes easy to understand the growing, large financial deficits to China and elsewhere. It tells me that our strong commercial firms provide little to our standard of living. It explains why California which could be considered the eight largest nation by terms of GDP and although the richest state in our so-called richest nation, saw homelessness grow by 30% in 2019 in their world tech leading bay area of San Francisco. California also leads the nation with one-forth of
all homelessness in America. They are the canary in the cage. This is the direction the US is headed. Renting eats up one-half of income and homes are unaffordable. We live paycheck to paycheck with one stumble and homelessness is on the horizon.
I stated a lot of points in the above sentences. Let me digress.
Under GDP, the US is the richest nation in the world. However, if one used another standard for  evaluating like standard of living, the US falls to number 22 on the scale. This is the scale that counts. The two political parties in America are at fault. Outsourcing is allowable in a free enterprise. My point is that once you export and seek to re-import under your brand name, that is a no-no. You should be taxed with tariffs to protect American workers and standard of living. This is how I view the foreign supply chain.
Speaking of the supply chain. In China the absentees of workers is hurting these firms. Apparently, they are living from order to order. With no orders being filled and no money coming into the coffers, many are on the brink of collapse. Who knew?
Then, there is the other side. Shareholders would disagree with me. Of course, their self-interest for greed forgets the effects to the nation. If they protested outsourcing, well, that is one thing, but they didn't. You reap what you sow.
By the way just 10% of the nation own 84% of all stocks. A rising stock market does not help the 90% of us. The Federal Reserve in providing cheap money only helps the status quo. This is not economic prosperity, it is economic distortion!

10-Year Note

Just broke the all-time low of 1.31%. Sebastian called it. Heading towards negative rates. The Fed and fiat is a failure! End the Fed!

Another virus

Anytime that you speak of the Fed and central banks, you could get ill due to their financial virus. However, here I am referring to another kind of virus which is happening in India. This is a religious virus. Last week Muslims and Hindus' tolerated reach other. Now, they throw stones at each other. They fight, burn, and kill each other. The Indian government will shut down the internet in hopes that this procedure will kill the virus. They say this is to stop incendiary talk and pictures. This is true. It is also true that it is a way to stop democracy when governments are tyrannous.

Space X

is back in the news. They say that they may begin space travel by 2021. Their latest rocket into orbit will help to form a new wi-fi internet address. The point is to lower internet fees and make it available to everyone in the world. Sounds nice. We'll see says the blind man.

Gold tidbit

In the last quarter of 2018 central banks purchased more gold than ever-a record. In 2019 gold purchases by central banks came in second to 2018. One note: Canada, a commodity nation and gold producer, has a central bank that owns no gold. How about that!
By the way, everyone knows that China tries to keep their gold purchases a secret, but even with all the accumulations, they will have to continue buying for another decade to have the foundation to supplant the US dollar as the world's reserve currency. Of course, there are other ways this could happen among them is the IMF. That would be a sad day for the US, its citizens, including me.

Getting back to what is considered a good economy and one that is not. Jeffrey Winters wrote a book, "Oligarchy." He offers this question in it: what happens to a majority when feel that they never will rise out of their lower standings unless they win with a lottery ticket?
He found throughout history when the economy only works for a few and money is concentrated that society begins to despair and eventually collapses. It could be due to war to which they lose or a revolution commences. Not good, especially because it sounds like the present US.

Who's next?

Amazon just cut 1300 small delivery firms. This is the way Amazon grew in the first place. They have already dropped Fed Ex and UPS because those two could not live up to Amazon's standards. The problem with Amazon is the standards keep evolving higher and higher. If the same officers in the company were doing the work that they demand, nothing would be delivered. When the small firms matched the standards that Amazon wanted, Amazon created a new level like one day delivery. This will end badly for Amazon. They will seek to form their own delivery service, but their leadership will kill employee incentive. Hopefully, a union emerges and they put the kibosh to unrealistic standards. Even robots breakdown for repair!    

On the positive side, this is a leap year, Try to use the extra time for something good for yourself and others. Let's make our little world a nice place to live like in Carolina the other day. With their professional goalies both hurt in a game against Toronto, the only one capable of the position was the 42 year old Zamboni driver, Ayres. He offered to play. He suited up. The refs allowed him. Who says the refs suck? These refs are great! He gave up two goals, but blocked Toronto's last eight shots to secure the victory. This was not the Stanley Cup, but a beautiful moment in life. Well done! Go Canes! Never thought that I would say that being a Notre Dame fan.