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Authored by John Mauldin via MauldinEconomics.com,

The media and politicians like to talk about “the economy” as a general term. These days, there is a lot of talk about it having V- or U-shaped recovery.

But within the economy right now are several different economies, and they won’t see recovery at the same time or rate. So if we have to choose a letter for what the recovery will look like, maybe it should be a “K.”

That’s because some will go up while others go down. This is already happening and apparent, as Heather Long illustrates for The Washington Post:

“This dichotomy is evident in many facets of the economy, especially in employment. Jobs are fully back for the highest wage earners, but fewer than half the jobs lost this spring have returned for those making less than $20 an hour, according to a new labor data analysis by John Friedman, an economics professor at Brown University and co-director of Opportunity Insights.”

I have my own illustrations for you today.

The first is a chart I call Economy Part 1.

This graph goes back to 2000, and the red lines roughly show the trajectory of the recovery.

The St. Louis Federal Reserve database has not updated the second quarter, but I tried to represent it.

For a large part of the economy—maybe the largest part—recovery is going to be slower than that of The Great Recession. And it is going to be lumpy.

Notice that I have a recovery with a lower slope. That is in part because of the research by Dr. Lacy Hunt and others demonstrating that growth is slower in high-debt economies. Just a fact.

Note that we do recover; it just takes longer for this portion of the economy.

Then we come to Economy Part 2.

Faster recovery and the slope of the recovery is higher.

More like what I call the Stumble-Through Economy.

It still doesn’t look like the recoveries of the past, but that’s perfectly acceptable given the problems.

On this second chart, I want you to look at the yellow line I call the Disruptors. These are the companies that are changing the very foundations of our society and jobs.

I think by now most investors are well aware of the FAANG or FAAMG stocks, or whatever acronym we use. I am not including them in my thought experiment version of Disruptors. I mean, they are, but they have been around for a while.

Rather, I’m talking about the new companies that will not replace them but will join them in the pantheon.

You want to find out who the disruptors will be and how you can participate, rather than hunkering down. Because they will be the ones to lead the way… and keep charging ahead when other sectors finally start to follow suit.

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New York Times best seller and renowned financial expert John Mauldin predicts an unprecedented financial crisis that could be triggered in the next five years. Most investors seem completely unaware of the relentless pressure that’s building right now. Learn more here.

Typically, it is media companies that cower in fear any time Facebook changes its new algorithm, terrified it could result in a catastrophic drop in ad revenues. Now, it’s Facebook’s turn to be at the mercy of its most popular platform, in this case Apple’s iOS operating system, whose new upcoming version iOS 14 could lead to a more than 50% drop in Facebook’s Audience Network advertising business, the company admitted in a blog post today.

While previously Facebook had warned that iOS 14 could impact its advertising business, only today did the company outline just how profound that impact could be. The Facebook Audience Network allows mobile software developers to provide in-app advertisements targeted to users based on Facebook’s data.

In today’s post-cookie world, advertisers use a unique device ID number called the IDFA to better target ads and estimate their effectiveness CNBC explains. However, in iOS 14, each app that wants to use these identifiers will ask users to opt in to tracking when the app is first launched. Facebook said its apps will not collect IDFA information on iOS 14.

The impact of the revision could be tremendous: according to Facebook, more than 1 billion people see at least one Audience Network ad every month, although many of those are probably using Android phones and will not be affected by the change. While Facebook derives virtually all revenue from advertising, it’s not known what percentage is attributable to the Audience Network versus ads on Facebook and other properties.

As CNBC adds, in Facebook’s blog post it outlined steps it will take to ensure its advertising business is in compliance with Apple’s requirements. These steps will limit how effectively Facebook and its advertisers can target ads to iPhone and iPad users.

“We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS14 in the future,” Facebook said in a blog post.

“While it’s difficult to quantify the impact to publishers and developers at this point with so many unknowns, in testing we’ve seen more than a 50% drop in Audience Network publisher revenue when personalization was removed from mobile ad install campaigns,” Facebook said. “In reality, the impact to Audience Network on iOS 14 may be much more, so we are working on short-and long-term strategies to support publishers through these changes.”

Apple has not said when iOS 14 will launch, but it’s expected to roll out this year.

Submitted by Joseph Carson, former chief economist at AllianceBernstein

At this week’s Fed’s annual Jackson Hole conference Federal Reserve Chairman Jerome Powell is expected to announce a new policy approach that is intended to give policymakers more flexibility and time to achieve their inflation mandate. The irony is the proposed change is not necessary as the inflation mandate has been met. The problem is policymakers are not aware of it.

Inflation Measurement

The Federal Government statistical branches publish several measures of inflation. Among the most important are the consumer price index (CPI) and the personal consumption deflator (PCE). Accuracy is the most important criterion of inflation measurement, and both the CPI and PCE fail badly on this basic principle.

The use of non-market prices creates accuracy problems for both measures. Both measures base their estimates of housing inflation on what people would pay to rent their house, and not based on actual transaction prices.

But the PCE, which gets 70% of its prices from the CPI, also includes items or services provided to people by business and government. That creates another measurement issue because these items are not “sold” to the consumer.

This runs counter to the basic tenet of inflation measurement. That is inflation indexes are meant to capture what people pay for something, not what they may, could, or will pay.

Critics would argue it’s not the Fed’s job to measure inflation. That is true. But that didn’t stop Federal Reserve Chairman Alan Greenspan in the mid-1990s to argue before Congress that the CPI was overstating actual inflation. That testimony compelled Congress to create the Boskin Commission, which produced a series of recommendations designed to eliminate the presumed “overstatement” of the CPI.

Mr. Greenspan questioned the accuracy of reported inflation long before targeting inflation was a Fed policy tool. One would think the new generation of policymakers would be even more curious over accurate price measurement since it’s their target for policy success or failure.

The fact that core CPI, even with its downward bias on housing inflation, has been running above the 2% target for 4 of the past 5 years before the pandemic should be sufficient evidence that there is nothing wrong with the policy approach.

The irony in this is that policymakers have spent a year or more on a comprehensive review of its policy approach so that they could have more success in achieving their inflation target. And all along the Fed has hit and exceeded the inflation target and policymakers don’t even know it.

For those who see 2020 emerging as the peak year for corruption in US capital markets – or what little is left of them now that the Fed is in charge of everything – the SEC just gave you a big thumbs up.

Moments ago, the top US regulator voted to ease rules on a company’s business, legal proceedings and risk disclosures, paradoxically at a time when frauds like Wirecard run rampant and not even their auditors can catch them at the act. Of course, “enabling fraud” would not sound very professional, so instead the SEC said in its statement that it had “modernized” the “description of business (Item 101), legal proceedings (Item 103), and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K.” And since “these disclosure requirements have not undergone significant revisions in over 30 years” the SEC said that “the amendments the Commission is adopting today update these items to reflect the many changes in our capital markets and the domestic and global economy in recent decades.”

What it really meant is that it will now be even easier for companies to engage in fraud and have a perfectly legal claim that the SEC never required them to disclose various shady aspects of their business.

“Today we modernized our public company business disclosure rules for essentially the first time in over 30 years,” said SEC Chairman Jay Clayton. “Building on our time-tested, principles-based disclosure framework, the rules we adopt today are rooted in materiality and seek to elicit information that will allow today’s investors to make more informed investment decisions. I am particularly supportive of the increased focus on human capital disclosures, which for various industries and companies can be an important driver of long-term value. I applaud the staff for their dedication and thoughtful approach to modernizing and improving these rules and adding efficiency and flexibility to our disclosure framework.”

The SEC further said that the modernization of Items 101, 103, and 105 “is intended to elicit improved disclosures, tailored to reflect registrants’ particular circumstances, which are designed will improve disclosures for investors and add efficiencies to the compliance efforts of registrants.” And since the market is now all GenZers who have the attention span of a gnat, the SEC concludes that “the amendments are also intended to improve the readability of disclosure documents, as well as discourage repetition and reduce the disclosure of information that is not material.”

Here are the highlights on the voted changes:

• amend Item 101(a) by:
  • making it largely principles-based, requiring disclosure of information material to an understanding of the general development of the business;
  • replacing the previously prescribed five-year timeframe with a materiality framework; and
  • permitting a registrant, in filings made after a registrant’s initial filing, to provide only an update of the general development of the business focused on material developments that have occurred since its most recent full discussion of the development of its business, which will be incorporated by reference;
• amend Item 101(c) by:
  • clarifying and expanding its principles-based approach, with a non-exclusive list of disclosure topic examples drawn in part from topics currently contained in Item 101(c);
  • including, as a disclosure topic, a description of the registrant’s human capital resources to the extent such disclosures would be material to an understanding of the registrant’s business; and
  • refocusing the regulatory compliance disclosure requirement by including as a topic all material government regulations, not just environmental laws;
• amend Item 103 by:
  • expressly stating that the required information may be provided by hyperlink or cross-reference to legal proceedings disclosure located elsewhere in the document to avoid duplicative disclosure; and
  • implementing a modified disclosure threshold for certain governemental environmental proceedings resulting in monetary sanctions that increases the existing quantitative threshold for disclosure of those proceedings from $100,000 to $300,000, but that also affords a registrant some flexibility by allowing the registrant, at its election, to select a different threshold that it determines is reasonably designed to result in disclosure of material environmental proceedings, provided that the threshold does not exceed the lesser of $1 million or one percent of the current assets of the registrant; and
• amend Item 105 by:
  • requiring summary risk factor disclosure of no more than two pages if the risk factor section exceeds 15 pages;
  • refining the principles-based approach of Item 105 by requiring disclosure of “material” risk factors; and
  • requiring risk factors to be organized under relevant headings in addition to the subcaptions currently required, with any risk factors that may generally apply to an investment in securities disclosed at the end of the risk factor section under a separate caption.

Via Greg Hunter’s USAWatchdog.com,

Former Fed insider Danielle DiMartino Booth is not a fan of the Federal Reserve, especially now, with its massive money printing campaign.

DiMartino Booth thinks “the damage to the economy is permanent” and that’s not the only thing here to stay.  DiMartino explains,

“We are seeing permanent inflation increasing, and we have seen another uptick in initial jobless claims.  This is not the data you want to see if companies want to have pricing power. . . . We do have inflation where it is not measured, and that is in asset prices and housing prices.”

Di Martino Booth says the Fed will do everything possible to keep the money printing going.  DiMartino Booth contends,

“Anything they can do to keep the printing presses running, any cover they can try and create, any type of narrative they can try and paint that allows them justification to go from a $4.5 trillion balance sheet to a $7 trillion balance sheet…

The Fed is looking for cover to continue its constant quantitative easing (money printing) campaign.  If it says it is going to let inflation run hot, it has that cover it is looking for.  It is always about lower for longer.  It is always about keeping the printing press running 24/7.”

DiMartino Booth says don’t take the stock market highs at face value because if you look deeper, things are not that good.  DiMartino Booth says,

“The concentration of the seven largest stocks is now $8 trillion.  That is larger than most countries, by the way.  Without them, the S&P 500, the broadest benchmark stock index in the country, would be . . . a down year in the stock market.”

On the other hand, DiMartino Booth says the bailouts mostly benefited Wall Street and not Main Street.  DiMartino Boot explains,

“This is the haves and have nots of credit.  If you are a small or midsize company, good luck.  It’s very difficult to find credit.  If you are the biggest companies . . . you don’t even have to have profits.  You can just get as much money as you want to keep going.  So, it is as bifurcated as it comes. . . . There has not been as much discussion as needed about the monetary policy at the Federal Reserve that has done a bang-up job of keeping the largest companies going while we have watched a lot of Mom and Pops, that . . . just needed a liquidity bridge, go by the wayside.  This has been a tremendous fiscal and monetary failing.”

DiMartino Booth also warns, “As long as you have this type of damage and business travel being eviscerated, you are going to see permanent damage to the economy.  You will see entire hotel chains close down, and those jobs be lost for good in many cases.”

On unemployment in America, Di Martino Booth predicts, “at least 25% of these job loses will be permanent in nature stretching out through 2021. . . . I think there will be permanent damage to the housing market too . . . . Now, what we are seeing are evictions.”

Why are gold and silver prices taking off in the past few months?  DiMartino Booth says,

“The reason you have seen as much interest as you have in gold comes down to something very simple.  We are in a speculative ball right now.  Whether you are talking about junk bonds or the stock market, everything has gone completely haywire…

When the peanut butter hits the fan, gold is the one place where investors can find the protection they need…

As long as there is anxiety and disruption potential, that is what makes gold the perfect hedge whether you see deflation or inflation further out on the horizon.”

Join Greg Hunter as he goes One-on-One with financial expert and former Fed insider Danielle DiMartino Booth, founder of Quillintelligence.com.  

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DiMartino Booth founded Quillintelligence.com. There is some free information there. She also offers a subscription service for original cutting edge analysis called “The Daily Feather” and the “Weekly Quill.”  To become a subscriber click here.  There is also some free information and articles on DiMartinoBooth.com.