MarkFord.net

Friday, August 30, 2024, Delray Beach, Florida

August 30, 2024 No Comments

The State of Our Economy: Republicans Are Saying One Thing, Democrats Another… and Both Have “Facts” to Prove Their Claims

Here’s What I Think

On Aug.16 and Aug. 23, I wrote about the key issues I believe we’ll be hearing about from Trump/Vance and Harris/Walz for the next two and a half months.

My argument was that the issues that are most important to core Trump voters and core Harris voters – such as immigration, rising crime, gender ideology, and censorship on one side, and abortion, trans rights, global warming, and the plight of the Palestinians on the other side – won’t be the deciding factors in the upcoming election.

Instead, as it has so many times before, it will come down to the economy. To be more accurate, to the perception of the economy by undecided voters in the swing states.

So, is it healthy – perhaps healthier than it’s been in years – as Harris has recently been claiming? Or is it, as Trump is suggesting, a skyscraper of debt and mismanagement teetering on the verge of collapse, but savable if he is in the Oval Office?

I am not an economist. What I know about economics is the result of heading up a business that has been publishing newsletters, books, and special reports on investing for more than 30 years.

Nevertheless, I’m going to tell you what I’m thinking right now based on the reading I’ve done in the past, the ups and downs I’ve experienced as a businessman, and what I’ve been studying over the past several weeks to write this piece.

Here’s the Good News

The good news is that, despite countless predictions by some doomsayers to the contrary, the US economy has not fallen into a depression. In fact, we are not even in an official recession.

GDP has been growing a bit faster than expected, inflation growth is, at least temporarily, ebbing, and job opening numbers are officially rising.

Consumers are spending less, which is good, However, these same consumers are borrowing more – which Biden administration economists interpret as stimulating for the economy, though others see it as bad.

That’s all I could find for the good news. If you think I missed anything, please let me know.

And Here’s the Not-Good News

At the top of the not-good news is that the US is now about $35 trillion in debt, which is about $105,000 for every individual and $270,000 for every US household.

Over the last 12 months, as you can see above, the national debt has surged by nearly $2.3 trillion. That’s about $6.4 billion every single day, roughly $266.7 million an hour, and around $4.44 million a minute.

Click here if you want to watch it tick up live by the second. But be warned – it’s disturbing.

I know these numbers are abstract and difficult to fathom. But stick with me as I try to explain, to the best of my understanding, why they are so scary.

This peak debt of $35 trillion is not only an all-time high for the US, but also more than twice the debt load of China (in second place at about $14 trillion), almost three times Japan’s (in third place at about $13 trillion), and more than 10 times the UK’s (in fourth place at about $3 trillion).

$35 trillion is about 125% of our GDP, the sum of all the goods and services we produce. This is bad. Not as bad as Japan’s and Italy’s debts as a percentage of GDP, at 250% and 140% respectively, nevertheless bad.

As I said, the US economy is not in a recession right now. (A recession is technically defined as a fall in GDP for two successive quarters.) But for the US to avoid a recession in the near future, the Fed must reduce its $7.2 trillion balance sheet and stay on a path to normalize monetary policy. That is going to be a difficult – maybe impossible – job. It’s likely, in fact, that the Fed will restart “quantitative easing” – i.e., printing more dollars – very soon. That will increase, not reduce, our debt.

As for inflation, the Labor Dept.’s CPI (Consumer Price Index) rose 2.9% year-on-year in July, the smallest gain since 2021. That is a fact the Harris camp will be using.

According to official government data, inflation, which is most often calculated by using the CPI, advanced only 0.2% in July, up 3.2% year-on-year. But this is misleading.

That official rate, now called “core inflation,” does not include the cost of energy and food, which, quite obviously, comprise very significant percentages of middle-class and working-class expenses. And while it’s true that prices for some goods have fallen, they have been more than offset by rising prices for a range of items, including auto insurance (18.6%), childcare (5.1%), fast food (4.3%), and internet services (3.9%).

As for job growth, the Harris campaign is claiming that US employers added 114,000 jobs in July and taking credit for that as a sign of a recovering economy. What they won’t tell you is that the US economy must produce at least 150,000 new jobs each month just to keep up with population growth. So even if we did add 114,000 jobs last month, we would still be losing ground.

And it’s worse than that. These job growth numbers are estimates that have been consistently and grossly inflated. Here’s an explanation of how overblown the government’s numbers have been over the last 12 months.

From the WSJ:

It isn’t difficult to get a positive employment report every month when you are “adjusting” the final number by about a quarter of a million jobs that you just “assume” are being created somehow.

In any event, even if we take the government’s report at face value, the Sahm Rule (which has successfully predicted every recession since 1970) has still been officially triggered…. The rule stipulates that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12- month low.

Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023.

But Enough with the Government’s Questionable Data –
Let’s Look at What Is Happening in Reality

I feel more comfortable interpreting numbers that are easier to understand and harder to fake – i.e., numbers reported by businesses that are required under penalty of law to be correct. And here, the overall outlook is bleak.

Some examples:

Banking

US banks closed 28 branches across the country in just one week in July. Wells Fargo, Bank of America, and US Bank each closed eight locations in the last week. Greenville Fed, Chase, and Schaumberg Bank & Trust closed the other four.

Retail Business

The retail industry is going through a tough time. Since the COVID shutdown, there has been a massive abandonment of businesses across the country. Thousands of mom-and-pop stores have closed – many in urban areas – and retail chains are in no better shape.

The surveys I’ve looked at say the great majority of the mom-and-pops are shut for good. And those closed chain stores – it’s hard to say, but it is going to take time and some divine intervention to grow the economy to the point where they will be reopened.

If it were just the smaller stores, it would be bad news but not necessarily reflective of the health of the retail industry at large. However, these smaller closures are happening at the same time as the big ones.

Some examples:

* Two months after announcing plans to close about 40 stores nationwide due to financial woes, Big Lots has indicated on its website that it intends to close almost 300.

* Macy’s has plans to close more than 150 of its stores over the next three years.

* Stop & Shop will be closing 32 of its large grocery stores in the US northeast “as part of the company’s efforts to improve its financial performance.”

* CVS, one of the US’s largest drugstore chains, closed nearly 900 stores from 2020 to 2024. Additionally, the company announced plans to close dozens of its pharmacies inside Target stores.

* The furniture retailer Malouf sells beds and bedding in a fraction of the colors it did a few years ago.

* Avon Products, once one of the most iconic brands in the beauty industry, filed for Chapter 11 bankruptcy on Aug. 14.

* Blink Fitness, a chain of gyms that has more than 100 locations in seven states announced that it filed for Chapter 11 bankruptcy on Aug. 12.

* The Body Shop, a beauty brand originally from the UK, closed down all its US stores last year.

* In March, Dollar Tree announced that it would be shutting down nearly 1,000 stores in the near future.

* Family Dollar announced that it is planning to close at least 600 stores this year.

* Best Buy, the retail giant specializing in electronics, closed about 24 stores last year. While the company saw strong sales in the last quarter (thanks to the holiday season), it plans to close an additional 10-15 stores by 2025.

* And Walgreens, the big daddy of pharmacy retailers, is projected to shutter 2,150 of its roughly 8,600 locations over the next three years.

Restaurants

Restaurants could be said to be a subdivision of the retail industry, but their financial health is not always in sync. One might hope for some better activity with the restaurant chains – but overall, it’s just more bad news.

For example:

* Applebee’s is closing more than 30 stores this year.

* Red Lobster is closing at least 48 of its stores.

* Bloomin’ Brands began closing some of its Outback Steakhouses in February and plans to continue to close more as needed, as well as other brands it owns, such as Bonefish Grill, Carrabba’s Italian Grill, and Fleming’s Prime Steakhouse.

Overall, at least 11 retail brands have said that they’re closing US stores in 2024, totaling up to 1,401 locations.

Energy

The US has always had the advantage of massive in-ground stores of oil, coal, and natural gas.

Leftists generally and “renewable energy” devotees have been waging a political war against fossil fuels with cultish commitment. The Biden administration, starting on day one, catered to these voters by implementing a series of measures that has made our core energy resources dramatically more expensive in the last three years – which is the argument that Trump and Vance are going to be making.

But I don’t think most Americans from either side of the political spectrum have any idea about the economics of energy or how large the impact of energy prices is on the health of the economy. So, while I do think Biden’s policies have been detrimental to the economy, I don’t think the energy argument will be a winning one for Trump/Vance.

In fact, I’m bullish on oil, gas, and natural gas. I don’t foresee a future where the fossil fuel industry goes bust. Quite the contrary, the harder the government presses to move away from fossil fuels, the more fossil fuels will be consumed between now and whenever a deadline for eliminating them is pursued.

Keep in mind that every technology we have today that is green requires the burning of fossil fuels to produce the hardware and software needed to achieve a green economy.

Utilities

Because of our government’s energy policies over the last several years, utility customers across the country are increasingly paying more for less-reliable service. And the massive heat wave the US has been experiencing this summer has only made the situation much worse.

Real Estate

The US real estate industry is a mess. It began with the hysteria-inducing government-imposed COVID shutdown… which led to tens of millions of office workers working from home… which led to a huge spike in office vacancies and a big drop in commercial real estate prices, which has not been recorded and probably never will.

Example: A Washington, DC, office building was sold at a massive 75% discount last week. The 175,000 sq. ft. tower, which sold for $60 million in 2006, sold for $16 million this time.

Meanwhile, the housing market is falling apart because prices have been inflated so severely over the past several years.

One result is that evictions are on the rise. Eviction filings in 10 cities across the country are up more than 15% over the past year compared with the period before the COVID-19 pandemic began, according to the Eviction Lab, a research unit at Princeton University.

Education

The price to attend a traditional four-year college has surged. Some private colleges and universities recently announced tuition of $90,000+ for the 2024-25 school year.

Families are facing a record amount of student loan debt, with an estimated $100 billion in new loans to be issued in 2024, up from $98 billion in 2023.

That is probably why, according to the WSJ, enrollment at US community colleges focused on vocational skills rose 16% in 2023 to its highest level since 2018, according to National Student Clearinghouse data.

Bankruptcies

Personal and business bankruptcy filings rose 16.2% in the 12-month period ending June 30, 2024, compared with the previous year.

According to statistics released by the Administrative Office of the US Courts, bankruptcy filings totaled 486,613 in the year ending June 2024, compared with 418,724 the previous year. Business bankruptcy filings rose 40.3%, from 15,724 to 22,060 in the year ending June 30, 2024. Non-business filings rose 15.3% to 464,553, compared with 403,000 the previous year.

The Big Picture

The rise of US debt and the dismal state of the US economy cannot be assigned solely to Biden and Harris. The Trump administration – and every other administration in the past 20 years – has been equally complicit. Over that period, the landscape of the US economy changed greatly. The rich have gotten richer. The middle class has gotten poorer. And the number of people reliant on government assistance to survive has exploded.

This gets me back to the beginning of this essay. Wealthy East and West Coast voters may very well believe the economic “facts” they are hearing from the Biden administration and the Harris campaign. But according to a research report I cut and pasted from CBS Money Watch:

* Americans have a specific annual income in mind for what it would take to feel financially secure, according to a new survey from the personal finance site Bankrate. The magic number? $186,000 per year.

* Currently, only 6% of US adults make that amount or more. The median family income falls between $51,500 and $86,000, according to the latest federal data.

* For most Americans, financial security means being able to pay your bills while having enough left over to make some discretionary purchases and put money away for the future – and they have an even higher yardstick for feeling rich. The survey found they believe they would need to earn $520,000 a year to qualify as wealthy – up from $483,000 in the same survey last year.

As Sarah Foster, an analyst at Bankrate, pointed out, that gap between what the typical American earns and what they aspire to earn means “Americans think they need to make more money even if they know it’s unrealistic, they’ll never make that amount.”

Conclusion

Trump is essentially right in pointing out that the US economy is in bad shape – and could be teetering on the brink of collapse. I don’t know if he means it. I don’t even know if he understands macroeconomics. But the same can be said of most American voters.

What matters to voters is the microeconomics of the micro-economies in which they live. And those economies (all the industries listed above) are either floundering or foundering.

I don’t know any company owner or CEO who is optimistic about the future of his business. Nor do I know any consumer that believes prices haven’t risen to frightening heights.

If the November election comes down to how undecided voters feel about the economy today, as opposed to how they felt four years ago, the outcome looks bad for Harris.

Wednesday, August 28, 2024, Delray Beach, Florida

Notes From My Journal

August 28, 2024 No Comments

How Long Do You Want to Live? Here’s My Answer…

Among my wealthy friends and coevals—let’s say, among the top 1% ($6 million+ net worth)—I’ve noticed that the great majority of them are still busy with their lives, eschewing conventional retirement activities for other games of accomplishment.

Interestingly, the most common of these games is accumulating even more wealth than they already have. (Game Objective: He who dies the richest wins.) But logically, it is the least consequential. These are individuals whose current wealth is more than enough to provide for them, their children, their grandchildren, and any other people or organizations they might want to help financially.

From an emotional perspective, continuing with the get-even-richer game is understandable. All the people I’m thinking of began their careers with little or no money. To build the kind of wealth they built would have taken an enormous, almost an excessive, amount of single-minded concentration and sacrifice. When you spend 40 or 50 years working like that, it’s not easy to break the habit. You can’t switch it off like a light bulb.

I know. I’ve tried to retire three times.

The first time, I went back to work because, although I had a significant net worth, the income I could conservatively extract from that each year was not enough to pay for my overgrown yearly expenses.

The second time, I had those expenses covered, but I realized that there were several things I had always wanted to do that I hadn’t done. One of them was writing books. Another was to make a few movies.

Ten years later, having written and published about two dozen books and scripted and produced three movies, I tried to retire for a third time. But I found that I could not get myself to do those things that one is supposed to enjoy in retirement – especially golf.

What I wanted to do, I had to admit, was just keep on working. So, I did. But I changed my manner and purpose. I devoted half of my working hours, about 30% of my income, and more than half of my net worth to three major non-profit projects that, with the help of K and my three sons, I built through a family-directed foundation.

That is how I bowed out of the get-even-richer game and began playing the get-poorer game. But I was, and am, still working crazy hours.

Among my friends that stopped playing the get-rich game when they retired, more than a few replaced the hours they used to spend working with the self-education game – reading books, going to plays and concerts, joining discussion groups, learning new languages, and taking academic courses. I presume it’s because, like I did after my second retirement, they are taking advantage of the time they now have to pursue interests they didn’t have time for during their get-rich years.

And there is another “game” that I notice many of them seem to be playing – one they don’t talk about overtly: the longevity game, the winner of which is he who lives the longest. These guys – whether they are vegans or carnivores or calorie counters – play seriously. They are very strict about their eating habits. They are equally diligent about their exercise, whether it be yoga and meditation, walking 20,000 steps a day, or playing basketball or jumping rope or lifting weights.

I admit to indulging myself, to the degree I can, in playing a similar game. But in my defense, I like to think that I’m not playing the same way. My goal in exercising is not to outlive anyone. My goal is to simply look like I’m going to outlive my fellow players. This is, I admit, a more superficial and less distinguished goal than living to 100. But I learned long ago that if you are 50 and in good health and do everything right in terms of eating well and exercising diligently and taking all the life-extending supplements you can get your hands on, the increase in your lifespan be minimal. The actuarial tables, which are the most reliable of such analytics, conclude unequivocally that it will buy you but a single extra year. Instead of dying at 82, you will die at 83.

So why, one might ask, do I continue to not only keep exercising, but also work like a mad man for 50 to 60 hours a week (and only about 30 hours when I’m “on vacation”)?

The obvious answer is that I can’t help it. But I do have a scientific rationale, which I bring up every time the question is put to me.

Of all the things one can do to increase longevity, the most important, at least according to the studies I’ve read, is having a reason to keep on living. And thanks to my lifelong habit of starting projects that are larger and more time-consuming than they at first appear to be, I have plenty of reasons!

I know that what I should be focused on in the waning years of my life is spending more time with friends and family. And I keep promising myself that I will do that. But somehow in my upbringing, I was infected with two moral commandments that are forever at the base of my conscience. One is to leave the world at least as sorted as you found it. The other is to always finish anything worthwhile that you start. So I also feel obliged to finish the many projects I’ve started over the years but have yet to complete.

So, there it is. And this brings me to a decision I made last weekend…

After Much Internal Debate, I’ve Made a Decision about the Future of MarkFord.Net

This is the antepenultimate weekly issue of this blog. My plan is to publish two more of these weeklies, then go to a once-a-month schedule with a slightly different format.

I read and watch a ton of material every day to feed the briefs and essays I’ve been writing on current events and topical issues. The new monthly publication will have little to none of that, as I’ll be attempting to restrict my writing to topics that have more universal applications – i.e., topics that will still be worth reading after I’m dead and gone and, thus, will provide me with a way to win the longevity game even if I don’t make it to whatever age the actuarial tables and fate have ascribed to me. As a bonus, I’m hoping it will free up plenty of time for me to focus on the other projects I want to finish.

Meanwhile, before moving on to the new format, I want to thank all those who have helped and supported me on this latest writing adventure. On top of my list are Judith Strauss, my editor of 30 years, and Giovanna Koo, who runs the business side of my life and has been responsible for getting all these hundreds of issues out. I want to thank Sean MacIntyre for his contributions on investing. And, of course, I want to thank all my readers, especially those that have taken the time to affirm or challenge my ideas along the way.

Worth Considering

August 28, 2024 No Comments

The Greatness and Difficulty of English

English is spoken in the big cities of just about any country an American tourist might visit. Do anything touristy, like check in to a hotel or go to a restaurant or go shopping, and you will find people that can speak to you in English – and it’s not only because it helps them relieve you of your American dollars.

One reason English is so widely spoken is, of course, because the US dollar is the world’s go-to currency and American tourists spend more dollars while traveling overseas than any other nationality.

But there is another reason that language experts say is equally or more important. Among the major languages of the world, English is one of the easiest to learn. Its grammar is simpler than that of the Romance languages (French, Spanish, Italian, Portuguese, and Romanian). And its diction is easier than German.

If you’ve ever compared the length of books written in English to versions translated into other languages, you may also have noticed that the English versions are usually considerably more compact. This is because English has a comparatively huge vocabulary due to its long history of readily incorporating words from other languages, including languages as diverse as Chinese, Japanese, Farsi, Hindi, and Native American dialects.

The worldwide acceptance of English is a benefit that English speakers that don’t travel abroad don’t have the opportunity to appreciate. If you want to say something and be understood in distant parts of the globe, English is always your best bet.

But there is a problem with English as a lingua franca that is seldom discussed. I’m talking about communication between English speakers with different accents. I’ve been to most of the world’s countries where English is at least one of its official languages. And I can tell you that communicating in some of those countries is not easy.

For example, I have great difficulty understanding the English spoken in northern England, Ireland, and Scotland. In parts of the Caribbean – I’m thinking of Grand Cayman, Bermuda, the Bahamas, and the British Virgin Islands – I have considerably fewer problems than I have in northern England, Ireland, and Scotland. But I have more difficulty in Jamaica, Trinidad, and Tobago, as well as the Turks and Caicos. It may surprise you to know that, for me, the easiest English-speaking countries are in Africa, e.g., Nigeria, Zimbabwe, and Kenya.

I’m thinking about this because of a short email exchange I had yesterday with CF, one of my three brothers. At the end of our discussion about his son’s birthday, he signed off, saying: “I am about to go into a meeting with my Indian programmers.”

I replied: “Have a good meeting… Hope you understand everything they say!”

He picked up on that and wrote, “Well, of course they speak English, and probably better than I do. But their accent is so strong that my most common response is: ‘Mahesh, you have a beautiful voice and I’m sure it’s just my aged hearing, but can you repeat that and say it a bit slower.’”

“I know that very well from my visits to our Indian office in Mumbai,” I wrote back. “My partners and I would be meeting with six or eight people – all smart, college educated, etc. But there was always one whose accent was so thick that I could not understand a word. Like you do, I would politely ask him to repeat what he had just said. And he would… exactly the way he had said it the first time. Because everyone else in the room had seemed to understand him perfectly, he had no reason to think my problem was his accent. He probably thought my mind had drifted. So I’d say something like, ‘I sort of see what you mean, but I’m not sure. Can you please say it again?’ He would look at me oddly, then repeat what he had just said – and again, I would comprehend nothing. At that point, thoroughly embarrassed, I would just smile appreciatively, nod, and say, ‘Ahah.’”

I am no longer directly involved in that business. But sometimes, when I think back on those conversations and the important issues we were discussing, I wonder what my embarrassment cost our business in profits. How many bad projects were approved by my “Ahahs,” and how many good projects were aborted?

Worth Quoting

August 28, 2024 No Comments

“It is by universal misunderstanding that all agree. For if, by ill luck, people understood each other, they would never agree.” – Charles Baudelaire

Worth Quoting

August 28, 2024 No Comments

“It is by universal misunderstanding that all agree. For if, by ill luck, people understood each other, they would never agree.” – Charles Baudelaire

Worth Watching

August 28, 2024 No Comments

An Impressive Speech by RFK Jr.

Watch Time: 50 minutes

Whatever your political preferences, I urge you to watch RFK Jr.’s speech on why he left the Democratic party and took his name off the ballots in the “battleground” states.

First, use your emotional brain to listen to his story and then ask yourself whether you trust him.

Second, use your neocortical brain to register the claims he is making and make a rational judgement about whether his logic is sound.

I’m 100% sure that you will be faced with facts that are new, and possibly disturbing, to you – facts that bear on some of the most important political issues being debated today, including freedom of speech in America, the war in Ukraine, having a sensible immigration policy, the importance to America of maintaining the dollar’s supremacy, the danger of politicizing US intelligence agencies (for Republicans and Democrats), and the hardly talked about global crisis of chronic disease.

Click here.

Worth Reading

August 28, 2024 No Comments

Monkeypox and the Monkeypox Vaccine: A Brief History

In the Aug. 19 issue, I wrote briefly about Monkeypox, a virus that some health officials are predicting might spread as fast as COVID-19 but with a lethality rate 10 times as high.

There was a time – and not terribly long ago – when I would have considered such a news item to be a scary fact. But now, after researching so many of the early “facts” we were given about COVID, I’ve become suspicious of any sort of news or analysis that comes from the world’s major health organizations, and especially the WHO, the NIH, and the CDC.

Here is Meryl Nass, the astonishingly prolific scientist/researcher on viruses and vaccines, tracing the 20+ year history of the Monkeypox virus and the vaccine developed to combat it, and explaining why she calls it Monkeypok$.

The Economy & Investing

August 28, 2024 No Comments

Warren Buffett and Charlie Munger Are Recalibrating the Berkshire Hathaway Portfolio… Shouldn’t We Be Paying Attention?

For several years, Warren Buffett has been warning investors that there are fundamental weaknesses in the economy generally and in the banking industry in particular that concern him. Now he is moving big chunks of the Berkshire Hathaway portfolio from stocks and into presumably safer assets like cash and debt instruments.

Click here and here for two perspectives on that.

Fun and/or Interesting

August 28, 2024 No Comments

Five Quick Bites

* Interesting. Smartphone-free schools? A thought-provoking proposal. What do you think? Click here.

* Interesting. Elon Musk on commercial space flights. Click here.

* Interesting. Bill Maher and Ben Shapiro talk about fat shaming. Click here.

* Interesting. Scans suggest many people with severe brain injuries are more aware than originally thought. Click here.

* Fun and Interesting. I’ve watched this three times and I still have no idea how he does it!

Photo of the Week

August 28, 2024 No Comments

Another Finalist in This Year’s Smithsonian Magazine Photo Contest…

According to the photographer (Irina Denisova), this photograph was influenced by paintings from Pablo Picasso’s Blue Period. Textures developed using artificial intelligence were used in processing.