Looking Backwards …
LB #1
This week the border bill died in Congress. This was going to be linked to Ukraine aid, aid for Israel, and then provide money for securing the border. I’m not sure how secure it was going to be with a daily quota of crossers which I saw was in one proposal, but I digress. It seems that both Republicans and Democrats want the border to be more secure, but my least favorite thing in the entire world stood in their way, not the girls from The View, but Congress. Lots of people are blaming lots of other people and the whole thing is a bit of a shit-show, but here is the key takeaway, this is a political issue. Republicans wanted this issue until they saw how bad Biden was polling largely due to this issue and rather than fix it now for the people, they helped nuke it so they can use it against Biden in the upcoming election. They will hang the border problem around his neck as an anchor, and after the election if they win, they get to shut the border and score a huge political win. Don’t think Trump wasn’t behind sinking this. If Biden passes a border bill, then he gets to talk up his win going into the election and a loss become his win.
Now this might be smart politics and bad governing, but that isn’t my focus here today. Denver has received over 40,000 migrants and which leads the nation per capita, and they are getting financially crushed by it. Alicia Caldwell and Michelle Hackman wrote in the Wall Street Journal how Denver is crushed after the bill died this week and why. “Denver has spent more than $42 million in the past year to house and feed the new arrivals. Public schools have ballooned by more than 3,000 students, creating a budget shortfall of roughly $17.5 million. The city’s safety-net hospital has seen at least 9,000 migrant patients in the past year, costing at least $10 million in unreimbursed care. The Senate bill that failed Wednesday held the promise of immediately unlocking $1.4 billion to reimburse cities and nonprofit aid groups that have been caring for migrants. Last year the government paid out about $790 million to reimburse cities and aid agencies for migrant costs, a fraction of what cities say they need to become whole.” I don’t want my tax dollars in a country that is $34 trillion in debt going to non-Americans for any reason. I don’t want it going to Ukraine or Israel, but I particularly don’t want it going to people that come here to sponge off our system. I have discussed that I am not unhappy with the immigrants, in fact I admire their courage, but as a country policy this is unacceptable and not sustainable. Caldwell and Hackman continue, “Officials estimate the city’s costs could rise to as much as $180 million this year as migrants continue to arrive. Without additional federal help, Johnston said (the Mayor of Denver), nearly every city department is likely to face a 15% budget cut, and sheltering and feeding operations will become the city’s second- or third-largest expense after public safety.” I don’t want federal dollars going to bail out city budgets. I want both balanced. If a government is going to tax its population, then there should be an ROI for the taxpayer. This is the opposite, this is taking from workers and rewarding non-workers. When people say we have a productivity boom in this country, I don’t know what the hell they are talking about. Productivity in what, implementing socialism? So turn down the volume if you are in public, seriously turn it down, when are the taxpayers going to say to their awful politicians, Fuck you, I’m not paying taxes for this. Fuck you for not upholding the Constitution, fuck you for playing politics instead of acting now to provide safety and security for our friends and families. The farmers in Europe just said Fuck you to their politicians and they won. They poured shit all over the politicians’ buildings and roads were closed and they were bringing their countries to a damned standstill. It seems Americans have forgotten or we are still too fat and happy to care. As long as the government keeps printing money and keeps us spending money and watching ball games and dance videos on TikTok, then the Fuck you gets delayed. You can turn your volume back up as I am done ranting and speaking of spending….
LB#2
On Wednesday we found out the latest report on the state of the US consumer and it wasn’t pretty, it was beyond ugly. We go over to ZeroHedge, “After several months of wild swings in US consumer debt, culminating with last month’s explosion in credit card debt which was the 2nd biggest on record, in December households finally hit a brick wall because according to the latest consumer credit data published by the Federal Reserve moments ago, in the last month of 2023 total consumer debt rose by a paltry $1.561 billion, which was not only nearly a 90% miss to consensus estimates of $15.9 billion.. … but also a huge slowdown from November, tumbling by almost $22BN, the third biggest monthly drop since covid shut down the economy.” What does this mean for the consumer? Why are they pulling back so much?
Another thing that caught my eye was Affirm released earnings. Affirm is one of those new buy now pay later companies that has exploded in usage and no one is sure on how to measure this unusual new short term debt product called layaway on steroids. However even they guided very conservatively on Thursday after producing strong earnings numbers. Their stock was down after the bell 13%, giving back the 10% and more that the stock had risen prior to the report.
What happened to spending? Expecting $16 billion and getting $1.6 billion is a huge problem. Falling from $22B the month before, that is a damn air pocket. That is beyond recessionary, that is apocalyptic.
LB#3-
It seems that the consumer is slowing down their spending, but Congress certainly is not. Without the border bill upsetting the elections, the Senate is advancing a $95 billion standalone foreign aid package. A.L. Lee writes for the UPI “The Senate on Thursday preliminarily approved a $95 billion foreign aid bill that allocates $60 billion to help Ukraine fight Russia but leaves out any provisions to address the escalating crisis at the U.S.-Mexico border.
The modified emergency defense spending bill, sponsored by Majority Leader Chuck Schumer, D-N.Y., passed 67-32, with 17 Republicans joining with Democrats, including Minority Leader Sen. Mitch McConnell, R-Ky., and Minority Whip Sen. John Thune, R-S.D. The latest Senate bill includes money for Ukraine, Israel, Indo-Pacific security and global humanitarian assistance.
The deal includes $19.85 billion to replenish U.S. weapons and equipment to Ukraine, $13.8 billion to assist Ukraine in purchasing weapons from U.S. manufacturers, and $14.8 billion in support to help with training and intelligence gathering.”
If only the American taxpayer had lobbyists that filled the politicians’ pockets with millions of dollars to advance the items that they would like to see passed in Congress. That’s right the taxpayers do, they have about $5 trillion in dollars that they could direct or redirect if they simply learned to combine the 6th letter of the alphabet with the 21st. Until that time, we deserve what we get, more debt to support foreign wars that only benefit military companies and kill citizens far far away from Washington.
Looking Forwards…
LF#1
Speaking of killing, what is Ecuador going to do with these drug cartels? Another politician was executed yesterday in broad daylight in front of a crowd of people. Chris Samuel writes for the Express, “Diana Carnero, 29, had just finished the meeting in the town of Naranjal in Guayas on Wednesday afternoon and was reportedly filming a video addressing poor road conditions when she was attacked. Police said two male suspects approached the councilwoman on a motorcycle and shot her in the head before fleeing.” We have a lot of things wrong in this country, but we haven’t fallen so far as that. Let’s hope that we can make a U-turn before it does.
LF#2
The S&P 500 broke the 5,000 point mark and closed at a new all-time high this week. It has now rallied for 14 of the last 15 weeks which is the best stretch in history according to Sentiment trader. I heard that Nvidia was up a Tesla this calendar year. Its market cap has grown by the size of Tesla’s market cap in 5 weeks. Tesla’s market cap is some crazy multiple of all the car companies in the world. NVDA closed at an all time high of 721 on Friday. It is up around 50% in 5 weeks. This must be the best economy in history huh? Here is what has also happened in the last 5 weeks according to ZeroHedge, mass layoffs.
1.Twitch: 35% of workforce
2. Roomba: 31% of workforce
3. Hasbro: 20% of workforce
4. LA Times: 20% of workforce
5. Spotify: 17% of workforce
6. Levi’s: 15% of workforce
7. Xerox: 15% of workforce
8. Qualtrics: 14% of workforce
9. Wayfair: 13% of workforce
10. Duolingo: 10% of workforce
11. Washington Post: 10% of workforce
12: Snap: 10% of workforce
13. eBay: 9% of workforce
14. Business Insider: 8% of workforce
15. Paypal: 7% of workforce
16. Charles Schwab: 6% of workforce
17. Docusign: 6% of workforce
18. UPS: 2% of workforce
19. Blackrock: 3% of workforce
20. Citigroup: 20,000 employees
21. Pixar: 1,300 employees
Remember that in a business cycle, one of the last things to turn is employment. These employees will probably getting severance and they will not show up on government statistics until their severance is over. When will these layoffs start shaking up the government labor reports. The answer is soon, very soon.
LF#3
Well, I swung and missed on my NYCB call. New York Community Bank avoided going kaput, but it took drastic measures to avoid it. Timing is tough, but on Wednesday the stock was down again, and they threw a hail mary. It wasn’t completed but there was a penalty, and they get to try again. What do I mean. They named a new Chairman, Alessandro Dinello, Sandro, who came out and said we will do whatever it takes including selling loans to raise capital. They were reported to be selling good loans including loans on RVs on Thursday. On Friday, Sandro came out and put his money where his mouth was and bought 50,000 shares worth $200,000.
Here is the problem Sandro, you and others believe that your bank is solid and has many good loans on the books and is a go-forward enterprise. But the bank just announced that they lost $252 million, and you are propping it up with your $200k? Banking is and always has been a confidence game. When you have to announce that your bank is solid, it isn’t. When your bank is out of the news, and no one is talking about its fragility, it might be. By its very nature, fractional reserve banking is built on a foundation of sand. It reminds me of the movie Cinderella Man, the boxing movie about a heavyweight champion rising from poverty to success during the great depression after the stock market collapse. It shows desperate poverty and how people learned to do without and how much pride people had back then. In particular, there is a scene when boxer Jimmy Braddock’s wife goes to his boxing manager’s fancy high rise apartment to defend her man who she believes is being taken advantage of. She knocks on the door and refuses to leave and finally the manager lets her in, and she sees that they have no furniture. They have tea at a small folding table and the manager tells her that they are trying to keep up appearances. The manager’s wife then excuses him from the room and she talks directly to Braddock’s wife. She says that their men are trying but “every day they feel like they are failing us.” When a bank starts selling good loans, that makes their loan book weaker. When they put their own money into the company like Sandro did Friday, it is a drop in the bucket and they are hoping, hoping that the show of confidence will produce real confidence. They are trying everything they can, but they are failing. That is what happens in a recession. Good businesses fail because they run out of money, not because their business isn’t productive. This is what happens with leverage and every bank on earth has leverage, but not every bank will survive. Much like the boxing manager’s apartment, the bank’s balance sheet is hollowed out, but they are still in the game for a while longer. They are fighting for survival, and it is damn admirable.
The Dow Jones finished trading at ……38,761.
The 10-year Treasury bond is at …4.177%.
The price of Brent Crude is … $82.19 per barrel.
The price of gold is … $2,038/oz.
The price of silver is … $22.67/oz.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.