Backwards …
LB #1
Today we start off by mourning the death of an intellectual giant. Daniel Kahneman was, is, and forever will be the godfather of behavioral economics. He and his friend Amos Tversky upended economics in proving that people don’t actually respond to complex situations rationally. They dislike losing more than they enjoy winning. One of the assumptions of economists is that people do behave rationally so this was a groundbreaking direction that he helped introduce. His findings led him to create what is known as prospect theory. He won the Nobel prize in Economics in 2002. Justin Lahart writes for the Wall Street Journal, “Kahneman’s work found a greater audience with the publication of his 2011 book, “Thinking, Fast and Slow,” which reviewed his research with Tversky and popularized the idea that people are guided by two modes of thinking: “fast” thinking, which operates quickly and automatically, and “slow” thinking, which is more deliberative.” People that are interested in making us betting thinkers and more logical decision makers will always be revered here at the CTPC. The Princeton University psychology professor died this week at 90 years of age.
LB#2
On Jan. 21, 2024, we wrote about the decline in the Washington DC restaurant scene. The Washington Wizards had to provide security because crime was getting so bad, and that increased tip legislation was causing restaurant owners to flee. This week we see full-service DC restaurants cut 3,700 jobs, which is about 12% of their workforce largely due to the tip legislation. Peter Romeo of Restaurant Business Online writes via ZeroHedge, “The federal agency did not draw a correlation between the drop in jobs and the reduction in the credit, which fell in May and then again in July of last year. Restaurants there have also been affected by a slow return of government workers and employees of companies that interact with the government to their downtown offices. Operators say traffic has also been dampened by fears about rising nighttime crime. “In just seven months, the city’s full-service restaurant employment has been gutted by the change,” Sean Kennedy, EVP of public affairs for the National Restaurant Association, said in a statement. “Higher labor costs mean higher menu prices. That means diners are eating out less and tipping less, which in turn means less income for servers and operators.” Now do I really care if a wealthy set of legislators and lobbyists have to struggle to find a table for a comped dinner on Saturday night, no of course not. However, Romeo conintues
“Until May 1 of last year, restaurants were obliged to pay servers and other regularly tipped employees just $5.35 an hour if tips brought their income up to $16.10. The $10.75 that came from gratuities was the tip credit.
The direct payment required of a tipped worker’s employer rose to $6 an hour in May and $8 in June, and will rise to $10 on July 1 of this year.
With more of tipped employees’ income coming directly from their employers, many full-service restaurants in the Districts have tried to preserve margins by adding surcharges to their bills as well as by raising prices. According to the Employment Policies Institute, 70% of local sit-down establishments either have already tacked on service fees or plan to do so as the tip credit ebbs.
All told, 96% of full-service places in the District have raised prices since the rollback of the credit began last year” and this is the price of government interference in the workplace. The market will find an equilibrium, and higher wages don’t mean much when a server loses their job. Government interference again leads to job destruction.
LB#3-
Speaking of destruction, since 1989 the Barkley Ultramarathon has been raining destruction down on the bodies of some of the world’s best ultramarathon athletes. The race was inspired by the escape of Martin Luther King’s murderer James Earl Ray who escaped in 1977 and led authorities through similar terrain. This race, founded by Gary Cantrell, aka “Lazarus Lake” begins when he lights a cigarette. It is held in Tennessee, is 100 miles long, and has the cumulative vertical elevation gain of almost two Mt. Everests. Runners race against a clock of 60 hours. Sleep and energy deprived they push on and show what the human body is truly capable of. Runners deal with mud, thorns, rain, and falls as they attempt to learn something about themselves. Only 20 runners out of over 1,000 have ever completed the race and the story of the first 19 are amazing, but it is the first woman to complete the race Jasmin Paris that I want to mention today. Sean Ingle writes in the Guardian, “Paris, a 40-year-old senior veterinary lecturer at the University of Edinburgh, sprinted across the line after 59 hours, 58 minutes and 21 seconds – 99 seconds inside the cut-off. Before collapsing in a heap.” If you go online to see the video, you can see her hit the finishing gate and then collapse from exhaustion. She remarks in the article about how she had been hallucinating, but she finished. I came away thinking two things: this woman must be so mentally strong and these people are bat-shit crazy.
Looking Forwards…
LF#1
I’m curious to see how the banks will respond soon as the outlook for deep rate cuts seems to be slipping away weekly as the inflation data just isn’t coming down. We spoke about New York Community Bank, and I prematurely called their demise before they got a billion-dollar bailout to save their backside, but strangely the stock has been selling off again even with the large cash infusion. It closed Thursday before the market shortened week at $3.22, which is near the bottom end of the range for the year. Furthermore, Yahoo Finance had an article from Reuters this week showing how the ratings agency S&P Global downgraded the outlooks for five regional banks- First Commonwealth Financial, M&T Bank, Synovus Financial, Trustmark, and Valley National Bancorp. “The negative outlook revisions reflect the possibility that stress in CRE markets may hurt the asset quality and performance of the five banks, which have some of the highest exposures to CRE loans among banks we rate,” S&P said. This issue is like interest on these bad loans, it just keeps accumulating every day very slowly, it is a trickle. The banks aren’t getting relief, and it gets a little bit worse every day, just a bit. Now it has been a year since Silicon Valley Bank, and it is worse, it has been a couple weeks since their bailout mechanism the Bank Term Funding Program expired and it gets a little worse, and now the outlook on Fed rate cuts has gone from 7 this year to only 2-3 and it gets a little worse. Folks, our nation’s financial foundation is built on banks, and we are going to see hundreds of banks fail and hopefully not thousands. If your idea of saving money is keeping money in the bank, I urge you to reconsider.
LF#2
We have been discussing for weeks that I think AI is overblown as far as its current use cases and abilities. I think it is a huge bubble right now with many companies’ valuations being overblown by its involvement in the technology. Emily Stewart writs for market insider that others are now seeing and documenting the same thing, “Amid all the unknowns that surround artificial intelligence, one thing is true: Almost everyone is a little bit lying about it at the moment. Companies know investors have an appetite for all things artificial intelligence right now, and they’re eager to show off how they’re integrating the new tech into their businesses — or at least say they are. The Securities and Exchange Commission’s chair, Gary Gensler, recently warned about “AI washing,” or companies giving off a false impression that they’re using AI so they can amp up investors. And while some companies are simply exaggerating the tech they do legitimately use, others have taken it a step further. In March, the SEC settled charges against a pair of investment advisors that were accused of making “false and misleading statements” about how they’re using AI.” She goes on to cover ground we have already plowed like Google’s Gemini not being able to avoid bias and that ChatGPT still makes things up. She agrees that it might be a wonderful future innovation, maybe the next step in shortening the work week from 5 to 4 or maybe even 3 days, but it isn’t there yet.
LF#3
I want to do a quick speed round for our last point today as we have some recent developments with far-reaching future ramifications.
Houston is broke. That is the official declaration of Houston Mayor Democrat John Whitmire. He is proposing a 5% across the board cut to all city spending. Maryann Martinez writes for the Daily Mail, the city spends $160 million more than it takes in, it would have had to face this problem earlier, but the Covid stimulus money bailed them out, and firefighters are still waiting for pension obligations to be paid. Whitmire is right, and lots of people who think they are going to get paid will not. It’s financially impossible to have municipal workers work for 20 years, retire at 45 and then be paid comparable wages for the next 50 years. Actually, it is possible, they will be paid, but in dollars not worth the Charmin extra soft they wipe their …let’s move on.
The Biden administration just mandated that Americans will be driving EVs very soon whether they want to or not. “While electric vehicles (EVs) totaled less than 8 percent of sales of new cars last year, the Biden rule demands they reach as much as 56 percent in less than a decade, and as much as 36 percent for plug-in hybrid vehicles. The regulatory method to be employed is mandating that automakers cut carbon dioxide emissions by more than half by eight years from now. Far sooner than that as a result, just several years down the road, Americans may no longer be able to afford an ordinary gasoline-powered vehicle.
The extremism of the new regulations is a direct result of something many Americans likely didn’t think had anything to do with revolutionizing and dictating the ways they get themselves from point A to point B—2022’s so-called Inflation Reduction Act (IRA).
While doing nothing to reduce inflation, the law acted as step one of the implementation of President Joe Biden’s Green New Deal, giving the Environmental Protection Agency (EPA) explicit powers regarding greenhouse gases and in forcing solar, wind, and other expensive alternatives to fossil fuels on the private sector. “ writes Thomas McArdle in the Epoch Times. Much like interest compounding quietly or bad loans accruing on a bank balance sheet, the legislative creep that is the DC green agenda power state is coming. It is hidden in regulations written into thousand page legislation documents, and when it arrives for implementation to a broke society, it will be on the spectrum between outrage and revolution. You’re seeing it Europe where they are dumping fertilizer all over cities as they are killing their way of life. Be somewhere else….
In a wonderful piece of news for every tree hugger and bug eater out there, the green age is actually getting a real boost this week. Carbon emissions will be reduced, and a more efficient source of energy will soon be coming online which obviously means not solar or wind, but nuclear. ZeroHedge asks “Is the long awaited – and overdue – restart of the American nuclear age finally here?
In a move which may force the lunatic greens to storm the White House, on Wednesday the federal government announced that it would provide a $1.5 billion loan to restart a nuclear power plant in southwestern Michigan. NJ-based Holtec International acquired the 800-megawatt Palisades plant in 2022 with plans to dismantle it, but with support from the state of Michigan and the Biden administration, the emphasis has shifted to restarting the nuclear power plant by late 2025 instead.
What is remarkable is not that the US is throwing some money at a nuclear power plant – since the US sells $1 trillion in debt every 100 days, it may as well go full “Brewster’s Millions” (or rather “Trillions”) and spend it all asap; it is that this would be the first nuclear power plant to be reopened in the US, setting a precedent as atomic energy makes a triumphal comeback.” Folks, this is the productivity miracle that we need. If we stopped providing tax credits for silly EV projects and just invested in nuclear we could accomplish many of the bug eaters goals and keep lobbyist money from flowing into the pockets of the day traders in Congress. As long as Boeing isn’t building or running the nuclear plant, that is a future that I am looking forward to.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading at ………..an all time high of 39,807.
The 10-year Treasury bond is at …4.206%
The price of Brent Crude is … $87.00 per barrel.
The price of gold is … at an all time high of $2,254/oz.
The price of silver is … $25.10/oz.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.