The Numbers Are Pretty Clear

We are in a bear market. The questions, for investors and retirees on a fixed income: How bad is it? And how long will it last?

Three facts from Bonner Private Research:

* The average bear market on the S&P 500 lasts 13.7 months and ends with losses of around 38%. That’s based on data from the eight bear markets since 1973. (A bear market being defined as a decline of more than 20% from the high.)

* The 1973 bear market lasted 21 months and resulted in a peak-to-trough decline of 48%. It took 69 months to make new highs. The dot.com bear lasted 31 months, saw a 49% peak-to-trough decline, and took 31 months to make new highs. The 2007 crash lasted 17 months, resulted in a 57% decline, and took 40 months to recover from.

* This bear market, so far, has lasted six months and resulted in a decline of around 20%.

After enduring the pandemic, ride-share companies like Uber and Lyft are now facing high inflation, driver shortages, and dwindling passenger numbers. According to a new report, the average fare is at an all-time high. And collectively, the companies had 20% fewer riders and 35% fewer trips in Q1 compared to Q1 2019. Click here.

New data shows home prices jumped 20% year-over-year in March. The rise marks the highest jump in the S&P CoreLogic Case-Shiller Home Price Index in its 35 years of data collection. Click here.

The Biden administration’s proposed tax holiday for gas is dumb for so many reasons. First, because it could only, at best, make a 2% difference of 15 cents. But also because this type of tax – a use tax – is one of the few that actually helps keep prices low. Click here.

Common Sense Prevails…

In Sports: After smashing national records and winning the NCAA championship, transgender swimmer Lia Thomas announced that she was hoping to compete in the Olympics. Maybe not, said FINA. On Sunday, the swimming world’s governing body announced a new rule disallowing trans females from competing in women’s events if they went through puberty as males. Trans men, however, will be free to compete against natural-born men without restrictions. Click here.

In Energy Production: Germany, a longtime European leader in the green energy world, is going to reopen shuttered coal plants as oil prices continue climbing. Click here.

The Rising “Misery Index”

Last week, in an attempt to slow the economy without sending it into a recession, the Fed announced the biggest interest rate hike in 28 years. A recession is still likely. But even if we don’t fully enter into one, the outlook is dismal.

As you can see from the above chart, the “misery index” is rising dramatically. What’s the “misery index,” you ask? Developed by economist Arthur Okun in the 1970s, it’s an informal indicator of the economic well-being of a society. The higher the index, the worse the suffering.

The index is calculated by adding the unemployment rate to the inflation rate. A “normal” rate should be between 5.5 and 6.5. That’s based on the Fed’s target inflation rate of 2% and the 3.5% to 4.5% that is generally considered full employment. Right now, it’s closing in on 12.

The Start of a Tough New Economic Climate 

You know things are getting tough when The Washington Post is willing to publish an editorial on the economy that makes good sense. Click here.

More About Long-Term COVID 

In the June 3 issue, I wondered about the science supporting the existence of Long-Term COVID.

Is it really a medical condition? I was skeptical. And I still am. As I said, there is no empirical evidence that it exists independent of subjective accounts of various symptoms. I find it interesting that, in the past 12 months, JAMA, the CDC, and the European Society of Clinical Microbiology and Infectious Diseases have all reported that women are three times more likely than men to report most physical and all psychological symptoms. And the highest reporting came from men and women with a history of anxiety disorder.

The rise in local rental prices (see above) reflects a larger trend: two years of growth in the US housing market. That includes house prices, rental prices, remodeling expenditures, brokerage fees, etc.

From March 2021 to March 2022, the average home price as measured by the S&P CoreLogic Case-Shiller National Index rose by a stout +20.6%. That’s the highest rate of growth ever recorded for the index.

In a recent issue of Zacks, Mitch Zacks explains the factors driving this:

1. Low Inventory of Housing 

Following the 2008 Global Financial Crisis – spurred in part by a collapse in the housing market – new-home construction in the US plateaued. As a result, Freddie Mac estimates that the US is about 3 million homes short of what’s needed. At the end of April 2022, there were only 1.03 million homes for sale in the US. That’s about a two-month supply – about 50% less than historical averages.

2. Low Interest Rates 

Part of the Federal Reserve’s plan to boost the economy during the pandemic involved becoming a large-scale purchaser of bonds backed by agency mortgage loans from Fannie Mae and Freddie Mac. The Fed created a massive demand for mortgage securities, which pushed yields down and generated the lowest mortgage interest rates in history by the end of 2020.

3. A Surge of Millennial Buyers 

In 2019, millennials surpassed the baby boomers as the largest living adult generation in the US. But many were not buying houses. They were living with their parents. COVID-19 changed that. In 2020, millennials accounted for more than 50% of all home-purchase loan applications for the first time ever. By 2021, millennials made up 67% of first-time mortgage applications and 37% of repeat-purchase applications. A rising trend that appears likely to continue.

Is a Crypto Winter Coming? In his recent quarterly earnings call, Coinbase CEO Brian Armstrong said, “Ironically… I’ve never been more bullish on where we are as a company.” He said that in the midst of a cryptocurrency free-fall. Coinbase stock dropped 60% in five days. Armstrong even admitted that he’s anticipating a so-called “crypto winter.” But he is confident that the company can survive it by making good use of its $7 billion balance sheet and by “hiring talent and acquiring companies.” Maybe. I don’t think the cryptocurrency industry is over yet. There will likely be upticks in the future. But given the existential threat that cryptocurrencies pose to all governments that print fiat currencies, I’m betting they will become, in my lifetime, a thing of the past.

And I just saw this little news item:

 New York Senate Passes Moratorium on Bitcoin Mining 

Click here.

A Growing Health Concern 

Nearly 30% of adolescents in the US have prediabetes. Click here.

Clinton DNC Scandal 

Hillary Clinton’s campaign and the DNC agreed to pay a combined $113,000 to the FEC, according to documents made public on March 30, after the commission found probable cause that the campaign broke FEC rules about how donations can be used. Said Kash Patel, lead investigator of the 2018 probe into alleged Trump-Russia collusion, “What we knew when we ran the Russiagate investigation, Chairman Nunes and I, we exposed that the Hillary Clinton campaign paid for the Steele dossier, an opposition research hit job. We had proven that some years ago.”

California’s Vanished Dream 

Is the state facing an “existential crisis”? Click here.

In late March, CNN tested an exciting idea – a subscription-based streaming service that they called CNN+. It would compete with Fox Nation, which has more than 1 million subscribers and is growing fast. They hired 500 employees and invested $300 million into the project. They also promised to pony up another billion over the next four years. They expected to sign up 2 million subscribers in the first year, and 15-18 million after four years. But two weeks after the launch, the service had fewer than 10,000 users. The new CEO said, “This is nuts,” and shut it down on April 30.

Meat Speech Is Now Hate Speech 

I heard about the all-meat diet when Jordan Peterson claimed that he had used it to treat his depression. He decided to try it after his daughter had success with it treating a series of medical problems stemming from a bout with juvenile rheumatoid arthritis.

Limiting one’s diet to meat seemed extreme to me. Giving up green vegetables and other plant-based sources of vitamins and minerals seemed nonsensical.

A friend of mine tried it for a skin inflammation problem, and reported positive results. Since then, I’ve read more anecdotal evidence in its favor. And there are early studies suggesting that it can be effective for a variety of auto-immune disorders.

It’s too early to tell if there’s something to this, but it seems like a hopeful development. Right?

Well… no.

Like almost every health topic today, the all-meat diet has become a political hot potato. According to some, it’s another racist conspiracy. And opposition to it has shown up everywhere, including in this unpublished TEDx talk.

Check it out here.

Too Painful to Watch

I cringed watching this. It’s Biden’s new press secretary trying to answer a question anyone that has even the most rudimentary understanding of economics would be able to answer. You can see that her problem is not that she wants to redirect the question. It’s that she actually doesn’t understand that raising corporate rates is inflationary. We have all become comfortable with Biden’s constant lapses. But to put someone so unqualified in such a public position… what were they thinking?

US Economy by the Numbers 

Some worrying numbers from Bill Bonner:

* Disposable personal incomes are dropping – down 20% from March ’21 to March ’22. Most of that is due to the end of the COVID giveaways. But subtracting them, incomes are still falling.

* While wage increases are running at about 5%, consumer prices are rising at nearly 9%.

* GDP is falling at a 1.4% annual rate.

* The trade deficit hit a new record high – at $109 for the month of April.

* Productivity is in retreat – down at a 7.5% annual rate. The worst since 1947.

* Consumer prices are rising at the fastest pace in 40 years.

* Rents in Miami are up 40% year-to-year… 22% in Orlando… 17% in Las Vegas…

* The stock market just had the worst first quarter since 1939.