Week 26 of the Quarantine

SAN MARTIN, ARGENTINA – We are reminiscing, trying to recall what it was like – life before the internet. And before COVID. Before Tesla. Back when life was “normal.”

But remembering is like opening an old box of photos; you don’t necessarily find what you were looking for. Instead, you often find what you need to see.

And how we doom-and-gloomers suffered back then when life was “normal.” The U.S. budget was balanced (briefly). The country was at peace. We went to the office to work… and to stores to buy things.

It was so calm and tolerable; we only got through it by anticipating the tragedy ahead.

And we weren’t disappointed.

By our reckoning, the gaudy show began about 20 years ago. Since then, we’ve had bubbles… bailouts… bombs… and bumble-dumble leaders, who’ve caused nothing but trouble.

And now, it’s getting worse.

Massive Drop

But we’ll come back to that.

Let’s first look at the financial news. Tesla fell 21% yesterday… leading the market down. Even Zoom dropped nearly 5%. From CNBC:

Stocks fell sharply on Tuesday as another massive drop in tech put the Nasdaq Composite in correction territory and led to the S&P 500’s worst three-day stretch in months.

The Nasdaq Composite dropped 4.1% to end the day at 10,847.69. Tuesday’s drop put the tech-heavy Nasdaq down 10% over the past three days. It marks the Nasdaq’s worst three-day stretch since August. 

The Dow Jones Industrial Average plunged 632.42 points, or 2.3%, to 27,500.89. The S&P 500 slid 2.8% to 3,331.84. The broader-market index was down nearly 7% over the past three days, its worst three-day stretch since June.

September is typically a bad month for stocks. This one is shaping up to be no exception.

As to whether this selloff will continue, we have no opinion. Mr. Market can do what he wants.

Bawdy Spectacle

But as to what the Federal Reserve will do if stocks continue going down, we have no doubt. It will react, seeking to upstage Mr. Market… with a fan dance that exposes plenty of fake flesh and arouses investors’ animal spirits.

The Fed has been rehearsing for more than two decades. The show is not likely to disappoint this time.

But what is new is that the federal government itself has gotten in on the act. It is now doing for Main Street, more or less, what the Fed did for Wall Street. That is, misleading it… falsifying it… and corrupting it.

Today, the U.S. stock market no longer reflects an intelligent, price-sensitive allocation of capital or a wise use of Americans’ savings. It, like the U.S. politics behind it, has become a delirious, bawdy spectacle paid for with trillions in fake money from the Fed.

And every time the party sags, with investors cashing in their chips and heading home, the Fed comes in with a whole new show… more risqué… more daring… and more expensive than ever before.

Numerical Mischief

But while the Vegas-style extrava-palooza went on on Wall Street, Main Street was neglected, forgotten… quiet.

That is until the government created the COVID crisis.

Even now, nearly six months after the declaration of emergency by Donald Trump, 30 million people are collecting unemployment benefits. Mr. Trump now brags that the unemployment rate is down to 8%. But that just shows you what mischief you can do with numbers.

In February, there were some 164 million people in the U.S. workforce. Let’s see… if 30 million are now on “unemployment”… to say nothing of the millions who don’t have jobs but who don’t qualify for unemployment benefits… that represents 18% of the workforce, not 8%.

Recent data show that these people are unlikely to find jobs anytime soon. There will be no V-shaped recovery, in other words. And no U-shaped recovery either.

Instead, we opined last week that it was more likely to be shaped like an L… flat-lining, in other words. People have gotten in the habit of not going out and not spending money. Job cuts are becoming permanent.

But Jeff Tucker, an economist at the real estate business Zillow, has another letter. He says it will be more like a K, with a few people doing very well… while the others sink lower and lower.

Moving Out

None of this would have been possible during “normal” times – before the internet and COVID-19 changed everything.

Before the internet, we worked 10-hour days. In the office by 8 a.m. Out by 6 p.m. Most people worked eight hours.

And on weekends? With no laptops to open or iPhones to check, the weekends went by with little thought to the business world.

Now, even in our 72nd year and 5,000 miles from the home office, with no commute… and no coffee shops… we turn on our computer at 7:30 a.m. every weekday. It is rare that we turn it off before seven at night…

And then, on weekends, too – we “check our mail,” just to be sure there is nothing urgent to deal with. Or sometimes, we “check the news” to see if there is anything going on that we should be thinking about.

Now that so many of us can work “remotely,” the big, old, tattered cities are falling further into desuetude. People who can are moving out. Why live close to work if you never go to work? Why live close to nice restaurants, bars, and nightclubs if they are all closed?

Moving In

Where are people going? To the new “Zoom Towns,” says Tucker. Prices in these smallish towns are rising at 20% per year and more, according to real estate brokerage Redfin. Nationally, home prices are up 8%… while listings are down almost 22%.

Rents are falling, too. And rental demand. Zillow says almost 3 million adults, mostly millennials, have moved in with their parents or grandparents. There are a record 32 million of them now living with their parents or grandparents.

All of which is part of the K-shaped recovery. Older, settled, prosperous, stock-owning… zooming… people are able to live and work remotely – often in beautiful, safe places far from the maddening crowds.

But for younger, more indebted, poorer people… those who work at pick-up gigs or in the hospitality industry… those with no savings… those who live hand-to-mouth… things are not looking good.

After all, when you live paycheck-to-paycheck, what do you do when the paychecks stop? And what do the feds do when 100 million voters can’t make ends meet?

Screwed Up

It wasn’t like that in the 20th century. That was back when life was “normal.”

But back then, young people didn’t have to move back in with their parents… You could go out to a restaurant… You could get a job and earn money (rather than waiting for it to be dropped from helicopters)…

You still got mail – on paper!

We can scarcely remember it.

So, we close our eyes… and invite the past… and try to understand what made it so “normal”… and how the present got so completely screwed up.