Category Archives: US economy

26/5/20: COVID19 Impact on Travel and Consumer Demand


Some dire numbers from Factset on changes in consumer preferences / sentiment through March-April 2020:

Consumer Confidence by Age



  • "According to The Conference Board, consumer confidence has weakened significantly with the overall index falling from 118.8 in March to 86.9 in April, the lowest reading since June 2014." 
  • "... older Americans (aged 55 and over) are much less optimistic than survey respondents under 55. This poses a problem as we look to economic recovery... [as] households in which the head of household is 65 years old or older represent 22% of total household expenditures in the U.S. In addition, this age group dominates spending at full-service restaurants and travel and lodging."
Things are getting worse in travel and transport sectors:

Global Air Travel

  • "According to the International Air Transport Association, global air travel was down 52.9% in March compared to a year earlier, hitting its lowest level since the Global Financial Crisis."
  • "In the U.S., jobs in air transportation fell by 27.4% in April."
  • "The four major U.S. airlines—American, Delta, United, and Southwest—are prohibited from laying off or furloughing workers until after September 30 as a condition of receiving billions in payroll assistance as part of the CARES Act. But these carriers have been asking employees to take voluntary unpaid or lower-paying leaves, reduced hours, and early retirement."
On travel sector:

Vacation Plans

  • "The April consumer confidence survey shows that just 31.9% of respondents intend to take a vacation within the next six months. This down from 54.9% in February and is the lowest reading ever in the 42-year history of this survey question."
  • "We only have monthly personal consumption data through March... In March, consumption on accommodations was down 43.3% compared to February while air transportation had dipped by 53.5%." 

15/5/20: Generational Effects of Ultra Low Interest Rates


Just because jobs are so plentiful and careers are so rewarding in terms of potential growth in life cycle income. the Millennials are really cheering their future in the Social Mobility Central, the US of A... oh, wait, sorry, theatre of absurd is so 1990s...

Here is the chart showing returns on savings for the already financially-distressed younger generations, updated through March 2020:


Things are ugly. In March 2020, retail nominal deposit rates for 3 months-duration Certificates of Deposit in the U.S. banks have fallen from December 2019 levels of 1.76% (annualized) to 1.35%. This is the lowest level since November 2017.

Think of the longer term comparatives. During the decade of the 1960s, average nominal rate of return on 3mo CDs was 5.51% with real return of 4.76%. In the 1970s, this rose to 7.27% and 5.66%, respectively. Through the 1980s, nominal average was 9.89% and real average was 8.73%. In the 1990s, things crumbled, with the nominal savings returns falling down to 5.32% and real rates down to 4.75%. The first decade of the 2000s saw nominal rates averaging 3.2% and real rates falling to 2.67%. And over 2010-2019, average nominal rate was 0.76% and average real rate was 0.39%.

Yes, avocado and toast are killing Millennial's financial wealth. Not ultra low returns on savings.

9/5/20: Some uncomfortable facts on the U.S. wealth distribution since 1989


The distributional effects of COVID19 pandemic impact on the labour markets in the U.S. will likely result in a massive debasement of the national wealth shares of the 'Main Street' segment of American society (the 90 percent) and a further increases in the national wealth share of the top 10 percent. So much is rather clear from the data on the labour markets (e.g.: https://trueeconomics.blogspot.com/2020/05/8520-path-of-tornado-us-labour-force.html).

But this process is not a unique feature of the current 'ideology' prevailing in the White House, nor is it a unique feature of the 'Republican Party ideology'. Historically, both, the Democratic Party Presidencies and the Republican Party Presidencies since the start of the 1990s on have been responsible for the dramatic drops in the share of national net worth accruing to those outside the top 10 percent of the wealth distribution. Here is the data through 4Q 2019:



The last time, the 'Main Street America' enjoyed sustained increases in net worth was during the tenure of George H. W. Bush. Since then, there have been just one short-lived period of increase in net worth, with subsequent declines erasing fully those gains: the Dot.Com bubble during the tail end of the Clinton and the starting part of the George W. Bush administrations.

And the current Presidency is actually somewhat exceptional to the trend: under Trump Administration, American's Main Street witnessed the lowest rates of decline in their share of the national net worth of 'just' 0.13% per annum, of all post-1992 administrations. In fact, the share of the country's net worth accruing to the bottom 50 percent of Americans has risen under the Trump Presidency tenure at the fastest annualized clip since the data series started.

In simple terms, American policies of destroying the prosperity of the majority of the country's population are not reflective of the 'political divide'. Both, Democratic and Republican Presidencies have led to the effective debasement of the wealth of the American Main Street. And, in equally simple terms, the Trump Administration tenure so far has been more benign to the bottom 50 percent of the American wealth distribution than any presidency since 1989.

Like it or not, but the data is quite telling.

7/5/20: No Value in Them, Stonks

No, folks, the markets are still not in line with fundamentals:


And that applies to all three sets of fundamentals: pre-COVID19 conditions in the underlying economy (secular stagnation), during-COVID19 collapse of the economy, and post-COVID19 expectations for the economy.

Which, of course, explains why Buffett sees no opportunities for buying, given the above chart is one of his favourite indicators of value.

6/5/20: 1Q 2020 US GDP:


From Factset: "The decrease in first-quarter real GDP was largely driven by the 7.6% decline in consumer spending, which subtracted 5.3% from the total GDP number. Investment was also a drag on growth, while an improvement in the trade deficit partially offset these negatives. We may see downward revisions to these numbers with the next two data revisions, and second-quarter growth is expected to be far worse. Analysts surveyed by FactSet are currently expecting a 29.9% contraction in Q2."


Yeeks!