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Wood Ya?

10/25/2020

 
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Image: Joel & Jasmin Førestbird on Unsplash

Mid September saw lumber prices get close to the 1,000 USD per 1,000 board feet mark perhaps directly correlated to the 1.108 million new houses started.  In Denver, there was a shortage of fire treated lumber, something we had never experienced.  It made for tense conversations between purchasing agents and foremen.  Calling Home Depot desperate for wood is an embarrassing venture for everyone and nobody wins. 

Lumber is now at 515.30 USD.
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German Manufacturing Rolling (Kind Of)

10/25/2020

 
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Image: Lenny Kuhne on Unsplash

Purchasing Managers' Index reflected a fourth month of growth for Germany.  It includes the manufacturing and service sectors to gauge economic activity.  Manufacturing rated 58.0 while service came in at 48.9.  A value of 50 represents contraction.  This is encouraging because like star athletes, strong economies need to perform when it counts.  We know what happened to the service sector.

Now, if they could just fix the unwanted tire pressure sensor that has spouses yelling at each other over mixed readings, we'd all be better off.

EURUSD opens at 1.186 today.
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Big Enough For Junk

10/25/2020

 
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Image: Joshua Rodriguez on Unsplash
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The Fed's response to the plague involved the PPP.  As Rolling Stone wrote in July, even giant musical acts like the Eagles had their hands out.  Bands that sell out arenas and stadiums in normal non-plague conditions are huge business.  Other large businesses also benefited, seemingly unfairly, from the PPP.

Relationships with bankers and access to serious money is a perk to running any business with significant cash flow.  These bankers know other bankers and can create financing vehicles like junk bonds and BBQ handshakes with promises to pay later.

This leaves the three piece band, you know, the one that has to pay to open for a larger act, in serious trouble.  Almost 25% of small businesses have closed since the plague hit according to the Bloomberg article.  This gap creates the opening for giant firms to swoop in and absorb the market.  AMZN has doubled since mid March.  

Like government regulations, big businesses have the capital to absorb these drastic changes to their industries.  The little guy will continue to play his guitar but if he wants to have a live audience it will have to be after his shift in the warehouse and in front of lattes and weird green chairs.
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US Advertising Spend Down 13%

10/18/2020

 

Amazon shelled out a cool 6.9 billion USD in 2019 to remind our wives that the company with the most annoying cardboard boxes is there for them.  It won't hit those levels this year as all of US advertisement spend is expected to decline 13% excluding political ads.

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Plague and Brexit

10/18/2020

 
In case you forgot, UK is dealing with the plague as well as Brexit and the official transition period is December 31.  If UK doesn't budge and move to EU's demands, the divorce will be bitter and sudden.  Sentences like that previous one are platitudes to summarize that it's a giant mess over there that involves trade, travel, and fishing rights.

UK businesses are worried about their supply chains as prices are sure to increase with trade bottlenecks from governments who can't be bothered to respond to group texts.

I see your Schwartz is as big as mine. 
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Oh, Johnny From The Warehouse Got In, Too

10/18/2020

 

We talked about people taking their "stimulus" money (remember, governments don't stimulate anything) on the podcast and pouring it into their Robinhood accounts.  With all that friction removed, it was easier than ever for retail traders to get in the action in the furious bull market this summer.

However, some of these retail traders decided they are seasoned professionals and started adding options to their portfolios.  Reported by Shawn Langlois of MarketWatch, Cole Smead, president of Smead Capital Management, said, “They are buying bullish call options that expire inside two weeks. There was ($500 billion) of bullish call options bought in a four-week stretch by small retail traders.  In ’99 it was $100 billion, in ’07, it was $100 billion.”  With the expected bull to be retiring and served on a plate soon in Pamplona, a lot of traders will have to return to reality.

YouTube, sales funnels, and Robinhood have helped create unwarranted confidence and a deserved brewing disaster.  Don't be a dumbass.

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Here We Go Again

10/18/2020

 

Following a pattern of accepting a 20 USD bill from Dad before heading out Friday night, spending low risk money is still fashionable as long as others pay for it.  Boston Fed President Eric Rosengren said he's expecting bankruptcies from companies that have, "gradually increased risk by taking on more leverage, which magnifies returns with good outcomes – but also magnifies losses when bad outcomes occur."

The consequences of this irresponsible speculation will of course trickle down to lower income workers who have already been economically crushed by the plague.

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Auto Parts Manufacturers Hurting for Labor

10/11/2020

 
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Image: Birmingham Museums Trust on Unsplash
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The plague, at home learning for children, and a shift in how workers view work has made for a complicated situation in Michigan and Indiana which are important homes to car parts manufacturers.  The auxiliary industry supporting the big boys generated 12 billion USD in 2019 online alone.

One of the evergreen themes on the podcast is how employers are going to adjust.  Like regulations, huge swings in the economy hurt small companies harder and faster than behemoths because they don't have the working capital to absorb the blows.  We suspect poaching of top talent has also occurred because that's what we would do.

That pain is now felt in the increased demand for labor as absenteeism is a problem.  "Many suppliers are dealing with absenteeism rates of 10-15%, said Brian Collie, head of Boston Consulting Group’s global auto practice."  The response is to increase signing bonuses and wages, some up to $5 an hour, and even overtime.  Perhaps they'll roll out a we-actually-work-and-get-dirty version of Silicon Valley's infamous sleep pods for a mid shift nap.  Underground?

Unlike the airline parts industry which is experiencing an oversupply issue as fewer planes are flying and fewer hours are logged, people are still driving and buying new cars.  Look for the replacement cost of possibly the worst innovation of this century to go way up and profit margins decrease: Nissan's criminal continuously variable transmission that is guaranteed to slip at 100k miles.  Yeah, it's personal.

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Jim Cramer Doesn't Trust Politicians

10/11/2020

 
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Image: WORKSITE Ltd. on Unsplash

Oil has been on a trip fueled similarly to a Lego minifigure living in a house of his own skin.  Drill too much and the price can't find support (April 2020).  Drill too little, and earnings fall.  One US politician is for drilling and deregulation and his opponent has made his thoughts known regarding roughnecks.  Not trusting politicians is finally fashionable again.  Cramer says it's all you, bud, as you can still trade oil but investing, well, meh.

Check out Parsley (PE) on NYSE at 10.21 USD.

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Bank of Japan Preparing Digital Currency

10/11/2020

 
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Image: Masaaki Komori on Unsplash

In a response to China approving internal studies on a digital currency implementation, Japan has announced it will do the same as it keeps a watchful eye on its rival across the East China Sea.

Some of this is a reaction to the broken infrastructure to get "stimulus" funds to its citizens using the traditional methods this summer during the plague.

USD/JPY opens at 105.594 today.
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GDP Crushed in Hawaii

10/11/2020

 
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Image: Benoit Dare on Unsplash

Did you know Hawaii and Nevada rely heavily on tourism to keep their economies going?  Huh.  Q2 2020 saw the beloved states losing 42.2% of their GDPs attributing 18.85% and 15.62% losses from, well, no tourism, respectively.

This chart that state shows GDP losses for the second quarter to the US.  Each state's contribution is called out to summarize a 2.1 trillion USD drop nationally for that period.

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Now Do Heat Lamps

10/4/2020

 
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Image: Morgan Aragon on Unsplash

In March, there was a shortage of toilet paper.  In April, it was web cameras and desktop microphones.  In June, the US had a supply problem with children's bicycles.  Now, New York restaurants are enduring a heat lamp shortage.

25% indoor dining capacity is almost not worth it for restaurants in New York City.  This limit is mandated by Governor Cuomo.  The response by restaurant owners is to put patrons outside on the sidewalk.  Fall is here and they need to be warm enough to enjoy their food.  Supply goes down with high demand and yup, there go prices.  Supply chain guys are annoying.

I was in Times Square ten years ago and marveled at the line wrapping around the block to get into Olive Garden.  Tourists spent all that money to get to NYC, were surrounded by world class kitchens, and instead chose to wait for bread rolls and guests arguing about doing math or alfredo.   We're rooting for you, NYC.
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Not a Game

10/4/2020

 
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Image: ARTUR KERKHOFF on Unsplash

Earlier this summer, we wrote about big name bands who were caught accepting PPP loans.  This guy involved dragons and tried to take 6MM USD.  Tristan Bishop Pan of North Carolina is alleged to have gone so far as to fake documents of payroll and tax filings to land the funds for White Walker and The Night's Watch.  His efforts were rewarded with 1.7MM USD before the US government caught on.  He is charged with wire and bank fraud.

Tyrion recalled a proverb about wildfire probably meant for Mr. Pan.

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Gold Moving

10/4/2020

 
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Image: rupixen.com on Unsplash
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Gold had some fun on Friday hanging around the parking lot at 1,900 drinking anything but Milwaukee's Beast (hopefully) after news broke of President Trump being hospitalized for the plague.  RSI is retracing and 2,000 isn't far off.

XAUUSD will open at 1900.060 today.

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Don't Forget the Yen

10/4/2020

 
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Image: Nico Frey on Unsplash

The yen heard about the rave with gold and decided to stop by.  Asahi is a superior beer, after all.  USDJPY was at 105.670 before rallying upon President Trump's plague tweet and hit 104.944 in just over an hour before rallying halfway upon closing Friday.  The stalled US "stimulus" package is contributing to the uncertainty.

USDJPY will open at 105.314 today.

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