Tag: news

Authored by Michael Snyder via The Economic Collapse blog,

In all of U.S. history, we have never seen anything like “the mass exodus of 2020”.  Hundreds of thousands of people are leaving the major cities on both coasts in search of a better life.  Homelessness, crime and drug use were already on the rise in many of our large cities prior to 2020, but many big city residents were willing to put up with a certain amount of chaos in order to maintain their lifestyles.  However, the COVID-19 pandemic and months of civil unrest have finally pushed a lot of people over the edge.  Moving companies on both coasts are doing a booming business as wealthy and middle class families flee at a blistering pace, and most of those families do not plan to ever return.

Los Angeles is a perfect example of what I am talking about.  Once upon a time it attracted wealthy and famous people from all over the globe, but in 2020 it is “a city on the brink“…

Today, Los Angeles is a city on the brink. ‘For Sale’ signs are seemingly dotted on every suburban street as the middle classes, particularly those with families, flee for the safer suburbs, with many choosing to leave LA altogether.

British-born Danny O’Brien runs Watford Moving & Storage. ‘There is a mass exodus from Hollywood,’ he says.

Almost half of the entire homeless population of the entire country now lives in the state of California, and a large proportion of them are addicted to drugs.  Needless to say, this has created a nightmarish environment…

Junkies and the homeless, many of whom are clearly mentally ill, walk the palm-lined streets like zombies – all just three blocks from multi-million-dollar homes overlooking the Pacific.

Stolen bicycles are piled high on pavements littered with broken syringes.

Could you imagine trying to raise a family in such a community?

I certainly couldn’t.

And the worse economic conditions become, the worse the problem gets.  Crime is skyrocketing in L.A., and some residents have been shocked to discover strangers actually “defecating in their front gardens”…

TV bulletins are filled with horror stories from across the city; of women being attacked during their morning jog or residents returning home to find strangers defecating in their front gardens.

Of course Los Angeles is definitely not the only major city dealing with such issues.

On a per capita basis, drug use is even worse in San Francisco, and it is being reported that there is “a mass exodus of people looking to get out of San Francisco real estate”…

According to online real estate company Zillow, there is a mass exodus of people looking to get out of San Francisco real estate – as the housing market is on fire in the Bay Area suburbs, all the way to Lake Tahoe.

According to the company’s “2020 Urban-Suburban Market Report,” home prices in the city have fallen 4.9% year-over-year, while inventory has jumped 96% during the same period, as a flood of new listings hit the market.

In the end, a lot of people may have to take losses on their homes, but it will be worth it simply to get out of California.

And the state legislature has apparently decided that the mass exodus is not happening fast enough, because a bill is being introduced that would impose a new “wealth tax” on the very wealthy…

Fast forward to today when the ultra-liberal state of California is now ready to take this “socialist” idea from concept to the implementation phase, with the SF Chronicle reporting that a group of CA state lawmakers on Thursday proposed a first-in-the-nation state wealth tax that would hit about 30,400 California residents and raise an estimated $7.5 billion for the general fund.

The proposed tax rate would be 0.4% of net worth (most likely ended up far higher), excluding directly held real estate, that exceeds $30 million for single and joint filers and $15 million for married filing separately.

In the old days, a lot of Californians would just head north to Portland or Seattle, but those two cities are not exactly desirable options at this point.

The civil unrest in Seattle never seems to end, and Acting Department of Homeland Security Secretary Chad Wolf recently said that there had been “twelve official riots” in the first ten days after federal law enforcement officials left Portland.

Sadly, the east coast has experienced plenty of chaos as well, and the mass exodus out of New York City has been particularly dramatic.

In a previous article, I discussed the fact that the the New York Times had reported that 420,000 New Yorkers had moved out of the city between March 1st and May 1st.

But the exodus certainly didn’t end there.

According to the local Fox affiliate, between May and July there was “a 95 percent year over year increase in interest in moving out of Manhattan”…

According to the most recent data from United Van Lines, between May and July, there was a 95 percent year over year increase in interest in moving out of Manhattan. That compares with a 19 percent increase in moving interest in the U.S., overall.

The top destinations for people who moved out of New York City between March and August were Florida and California – which together comprised 28 percent of relocations. Texas and North Carolina made up 16 percent of moves.

And it isn’t just residents that are leaving.

Business after business is shutting down, and that includes some of the most iconic retailers in the city…

J.C. Penney and Neiman Marcus, the anchor tenants at two of the largest malls in Manhattan, recently filed for bankruptcy and announced that they would shutter those locations.

The Subway restaurant chain has already closed dozens of locations in New York City in recent months,

Le Pain Quotidien has permanently closed several of its 27 stores in the city and plans to leave others closed until more people return to the streets, an executive at the chain’s parent, Aurify Brands, told the Times.

Earlier today, I watched a video that someone had taken of all the boarded up shops along 5th Avenue.

If you have not seen that video yet, you can watch it right here.

I couldn’t believe what I was seeing.  At one time 5th Avenue was a playground for the elite of the world, but now it essentially looks “like a demilitarized zone”…

De Blasio’s New York has finally hit an all-time low: the once bustling city is now on the verge of looking like a demilitarized zone. Between the pandemic and the riots in the city, iconic 5th Avenue now looks more like a dystopian nightmare in a recently shot video posted to Twitter.

The video follows a car driving down a deserted 5th Avenue, with almost all of the area’s high end stores boarded up and shut down. There are few people seen on what is usually a busy street.

“Look at everything. Everything’s boarded up. Even the hotel. Boarded up,” the video’s narrator, who is obviously fed up with how the city looks, says.

In about six months, most of the progress that New York City has made since the dark days of the 1970s and 1980s has completely disappeared.

Homelessness and poverty are both exploding, and crime rates are shooting into the stratosphere.

If you can believe it, the number of shootings in July was 177 percent higher than for the same month last year.

If the deplorable conditions in our major cities were just going to be temporary, I don’t believe that we would be seeing such a mass exodus.

But at this point it should be clear to all of us that things aren’t going to turn around any time soon, and many people are convinced that things are just going to continue to get even worse.

Our major cities are degenerating right in front of our eyes, and there doesn’t seem to be any hope of reversing this process now that it has started.

In life, the decisions that we make always have consequences, and the consequences for the decisions that we have made as a nation as a whole will be very bitter indeed.

It’s emerging on Monday that Trump’s plane had a near-miss with a small drone on Sunday as it approached Washington DC for landing.

Multiple people on board Air Force One reported seeing a yellow and black device flying nearby, said to be shaped like a cross, which came just off the right side of the aircraft soon before touching down at 5:54pm.

President Trump was returning from his golf club in Bedminster New Jersey when it happened.

Several reporters traveling as part of the press pool were eyewitnesses, with Senior Bloomberg News correspondent Jennifer Jacobs commenting just after landing that “Multiple people on AF1 saw what appeared to be a drone just below the plane as we were descending toward Joint Base Andrews. We came very close to hitting it.”

The AFP’s Sebastian Smith was the first eyewitness to report it, saying the object came “remarkably close to the president’s plane” and that it “resembled a drone”.

@realDonaldTrump just landed at Andrews on AF1. Shortly before, while descending,we flew right over a small object, remarkably close to the president’s plane. Resembled a drone though I’m no expert. pic.twitter.com/roDFgpp4XH

— Sebastian Smith (@SebastianAFP) August 16, 2020

The Secret Service didn’t comment, according to Bloomberg but it typically doesn’t acknowledge active investigations.

It’s the second major security incident involving Andrews Air Force Base and its sensitive high-secured aircraft with the month.

Last week an Air Force helicopter on a training exercise out of Andrews was shot at from the ground while flying near Mannassas, Virginia. A pilot was injured and forced to make an emergency landing. The FBI has since been searching for the shooter and it remains unknown whether it was intentional.

Senior editor, Ash Bennington, is joined by editor, Max Wiethe, to talk gold, stocks, housing, and New York. After Ash analyzes the dismal Empire Manufacturing reading, he and Max discuss the NAHB housing number and explore what it means for the future of New York as professionals flee big cities for the safety of the suburbs. Ash and Max then interpret Goldman Sachs’ increase of its price target for the S&P 500, which leads into a discussion of the future of U.S. equities more broadly. Lastly, Ash and Max discuss the case for and against precious metals and emphasize understanding both sides of the trade. In the intro, Jack explores dislocations in the U.S. housing market, looks at Berkshire Hathaway’s investment in Barrick Gold Corp, and gives a sneak peak for Tuesday and Wednesday for Real Vision’s “Precious Metals Week.”

Authored by Bruce Wilds via Advancing Time blog,

Sunday on Meet The Press the moderator touted United States Postal Service (USPS) as the most respected institution in America. He even went further claiming it has been for decades. He then went on to attack President Trump on a series of fronts. This includes what he claims is Trump’s politicizing the additional funding needed by the USPS because it supports the idea mail-in voting can be done in an efficient manner. This of course was immediately confirmed and expanded upon by those on the show. Yes, Trump is making an effort to discredit mail-in voting claiming the system risk widespread fraud but he is not alone in thinking mail-in voting is not the way to go or the USPS is badly in need of reform.

USPS Claims It Cannot Guarantee Mail-In Ballots

Anyone asking whether something is going on behind the scenes can imagine that The Washington Post owned by Amazon CEO Jeff Bezos is partially behind focusing the direction of this dust-up. The Government Accountability Office (GAO) has made it clear that neither one-time bailouts nor higher prices for mail will save the USPS. For over ten years the GAO has designated the USPS as “high-risk.” This term is used to describe an agency or department that is vulnerable to waste, mismanagement, and in need of reform. With this in mind, it has been noted that for years Amazon has been a big beneficiary of having its packages delivered at below cost in a deal hidden from the light of day. This has given it an unfair advantage over competitors and boosted Amazon into a major force while at the same time damaging and destroying businesses across the nation.

While I never assume those reading this article will agree, I would like to argue, as I have for years, the USPS needs a total makeover.  It has become a bit of a dinosaur and it is time to rethink its mission. To be clear, I’m not claiming the USPS has not changed over the years. It has evolved into something far different than originally planned but in recent years it has not changed fast enough. For example, in 1917 the USPS outlawed the mailing of people, this was several years after a young child was mailed from her parents to her grandparents in Idaho. While that was a good move, changes to accommodate the lessening importance of first-class mail is lagging.

Some Efforts to Deliver Mail Cost To Much

It may be hard for some people to believe but since, “legally, the postal service has to deliver mail to all Americans” some of their efforts seem a bit much. The USPS uses mule trains to deliver about 4000 pounds of mail, food, supplies, and furniture to an Indian village of 208 people at the bottom of the Grand Canyon. Because some of the mail is perishable, the post office where this route originates has walk-in freezers. The USPS also employs a 45-foot mail boat to deliver mail to passing ships sailing on the Detroit River. This isn’t the only place where people receive their mail by boat. In Alabama’s Magnolia River, 176 homes on the 31-mile route receive their deliveries from a boat that pulls right up to fixed mailboxes on their docks.

To be clear, the USPS is huge and it is also a money-losing entity and has been for years. In 2015 it had 617,254 active employees and today it is the operator of the largest civilian vehicle fleet in the world. The United States Postal Service delivers to every address in America, from the biggest cities to the smallest hamlets. Many Americans see it as a vital part of the nation’s critical infrastructure. On its website, it highlights the size and scope of its operations. This includes such things as the number of retail post offices, the number of people it employs, and even the quantity of tires it purchased last year. A statistic that is often overlooked is that almost 100% of these active and retired postal workers are also voters, this results in a great deal of political pandering.

In an article published by Reason, Eric Boehm reports the USPS has lost $78billion since 2007. Because the pandemic has crushed mail volume it may lose as much as $13 billion this year. When looking at these figures it is easy to see their business model is “not financially sustainable,” a government audit has concluded. This is why the GAO has called on Congress to reevaluate all aspects of the Postal Service’s operations. To be clear, this is an institution that cannot even bring itself to drop Saturday delivery. With this in mind, how can we expect it to look at more radical changes? Still, in March, Congress extended a $10 billion line of credit to the USPS as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Over time the situation at the USPS has worsened due to declining mail volume, increased employee compensation and benefit costs, and increased unfunded liabilities and debt. A good indicator of the Postal Service’s structural problems is that even as the amount of First Class mail it delivers has declined by 44 percent since 2006,  the number of postal workers has grown. Another concern is the growing shortfall in funds to pay for pensions and other benefits for retired workers.

At the end of 2019, the pension fund had $50 billion in unfunded liabilities. Now the fund that covers health care expenses for retired postal workers is facing a $69 billion unfunded liability.

House Democrats are now seeking a $25 billion Postal Service bailout in the so-called “phase four” stimulus bill lawmakers are currently negotiating.

While some people don’t see this as a huge amount of money, it is.

This constitutes $75 for every man woman and child in a country where many people don’t even bother to go to their mailbox for weeks at a time because all they get is junk mail. Still, for old widow Jones who looks forward to Fred dropping off her mail six days a week, a few dollars more is a small price to pay to keep this inefficient dinosaur afloat.

The rise in violent crime this summer across some of America’s top metro areas continued over the weekend, with dozens of shootings seen in Chicago and New York. 

NBC Chicago reports violent crime surged over the weekend, with some of the highest numbers recorded for the month. More than 60 people were shot and five died of their injuries. The chaos started early Friday evening and continued into Monday morning. The most recent fatal shooting was early Monday when a 29-year-old was gunned down on the 2400 block of South Trumbell.

The weekend before, Chicago observed 40 shootings and four deaths. A noticeable tick up in violent crime has been realized on a week over week basis.

Crime stats website HeyJackass! provides visuals of the crime spike this past weekend. On a 30 day basis, 415 people have been shot, and 69 killed. 

Much of the violent crime this year is concentrated in the Southwest, Sout Side, and West Side parts of the metro area. 

Someone is shot in Chicagoland every two minutes and ten seconds, while a murder is seen every eleven hours and 30 minutes. 

Guns are used in a majority of homicides. 

Most of the people shot this year sustained upper body trauma. 

While Chicago continues to spiral out of control, New York recorded at least 50 shot and six deaths this past weekend.

As gun violence surges in the Big Apple, President Trump weighed in on Twitter:

“Law and Order,” Trump wrote on Twitter. “If NYC Mayor [Bill de Blasio] can’t do it, we will!”

Chicago, New York, and other top metro areas have seen a jump in violent crime since the virus-induced recession began, followed by months of social unrest. From May to June, homicides in 20 major cities soared by 37%, led by Chicago, Philadelphia, and Milwaukee. 

The increases coincide with depressionary unemployment, as liberal-run metro areas implode, forcing people to flee to suburbia. 

By Tony Pasquariello, global head of Goldman HF Sales

Starting in the third week of February — and, from all-time highs — S&P dropped 35% in just 23 trading days. In that moment, we were confronting the greatest collapse of the global economy in modern history — and, sitting in the US, specifically in New York, you knew with certainty that the crisis was about to hit your shores. 

If someone had told you back then that just five months later (a period covering less than 100 market sessions) the stock market would be within a whisker of those highs — without a vaccine or treatment yet in hand — you’d think they were nothing short of crazy. 

Again, this was a May of 1942 moment: things couldn’t have looked bleaker, yet what’s followed a historic collapse in risk assets has been a historic recovery.

Ex-post, one can rationalize the retracement: the composition of the stock market is skewed towards industries that don’t necessarily mirror the cyclical growth, the nature of stock operators is to look forward and the collective policy response has been both unprecedented and unbounded.

As we sit here today, with consideration for current asset values and the enormous set of challenges in front of us, let’s hope the GS call proves correct: global GDP growth should swing from -3.3% in 2020 to +6.5% in ’21 (link) … with no rate hikes until 2025 … and, along the way, the balance sheets of global central banks grow larger and larger.

Over the next month, we’ll enter a new phase of the game, as market participants shift from a policy trade to a proper re-opening trade; so, get your R&R in now, as the period from Labor Day through election day will surely be spirited.

What follows from here is quick points and charts. As always, a taker of your views and feedback:

1. One subplot of the past week has been significant stress on consensus positions across asset markets. In turn, within the equities space, the value question is coming up a lot these days. With respect for the structural trajectory of secular growers, I’d argue one should have tactical upside on value to position for “right tail” outcomes.  Given the formal GS view on vaccine (GIR expects at least one vaccine approved by end-’20 with wide distribution by the end of 2Q’21, link) … as well as the broad positioning setup (the market has shown its hand in the past week) … one can see a scenario where value (e.g. Europe, US small cap, transports) benefits the most on a vaccine-driven cyclical upgrade, if only short-term.  These are not the best houses on the block, but that’s essentially the point. 

2. The interplay between real rates and the stock market is a well-worn truism. At some point, it’s fair to ask: how much further can real rates go from here?  The informal blink from Dominic Wilson in GIR: given the Fed’s anchoring, it’s reasonable to expect a further drop in front end real rates; further out the curve things are likely to be a bit more sticky.  Now, while I understand that financial markets live in the future, I find this a little interesting: today, 10yr real rates are … -1%.  I don’t know how much further they can go.  But, I do know that back in March of 2000 they were … +4%.  my point here: we live in a world of extremely easy financial conditions with central banks who aren’t likely to change directions for a long, long time — that’s a positive undertow for risk in an absolute sense, even if scope for further drops in long-dated real rates is apt to be more constrained. 

3. As the US election becomes a more dominant market variable in coming months, one can argue that a Democratic administration — while perhaps not changing policy on China — may see some more certainty on trade policy.  This comment from GIR is on point: “while the dominant focus thus far has been on the potential tax changes from a Democratic ‘sweep,’ the chances of shifts in international and trade policy have received relatively less attention. The threat and imposition of tariffs, especially against China, was a key market dynamic in 2019 in particular. Even if the China-US relationship remains fractious, it is likely that a Biden administration would rely less on this tool and that the difference in policy between a Trump and a Biden administration could be significant on this front.”

4. within quick points, some very quick points:

i. the outcome of the fiscal stimulus negotiations remains unclear, which introduces downside risk to the market … that said, the official GIR view is a $1.5tr package becomes law in August … if it spills into September, the tail risks grow in both directions (link).

ii. ESG remains a theme that is still attracting serious capital … the charts in the attached email give a very good feel for the magnitude and trajectory of these inflows.

iii. for better and worse, realized volatility is melting in equities … on the margin, this is a bullish development (demand from vol control strategies — and, you can start to own call wings again at reasonable levels of implied).

iv. yes, the transports have underperformed the broader market in recent years … then again, in the context of everything that’s going on, is it not a little remarkable that this sector is just 5% off the all-time highs?

v. at some point, I suspect EUR strength will become an issue for European equities … I still like it for a “vaccine trade,” but with the understanding it’s just a trade.

vi. AAPL is a few good days away from a $2tr market cap … as pointed out by sales & trading colleague Pete Callahan, it was 38 years from IPO to $1tr … and would be just about two years from $1tr to $2tr.

vii. I saw this on a Boston sports blog: home runs hit by the great Hank Aaron, grouped in five year intervals:

– age 20 – 24 … 150

– age 25 – 29 … 202

– age 30 – 34 … 168

– age 35 – 40 … 203

5. It’s been a long road to recover the pre-GFC peaks in US housing stocks, but the retracement is now complete:

6. As mentioned before, on most any traditional metric — P/E, price/book, EV/sales — stocks are expensive.  The one exception, of course, is when stocks are compared with the bond market.  Thanks to Cole Hunter in GIR, the moral of this story is the spread between the earnings yield on S&P and 10yr nominal rates is currently 368bps … while off the wides, that compares to an average spread over the past 44 years of 230bps: