• August 10, 2020

ELAM: Steepest GDP decline in 70 years - Odessa American: Dennis Elam

ELAM: Steepest GDP decline in 70 years

Print
Font Size:
Default font size
Larger font size

Posted: Sunday, August 2, 2020 5:00 am

GDP fell at a 32.9% annual rate in the second quarter, the steepest decline in 70 years of record keeping

Germany’s Economy Hit Hard – down 347.7%

Mexico suffers deepest drop on record

Wall Street Journal Today

And so one might think the stock market would be in a tailspin. But instead it peaked February 12 and dropped about 30%. A handful of tech stocks have registered double-digit returns since. That action dragged most indexes towards the February highs. The tech heavy NASD in fact made a new high. Gold and silver have hit new recent highs

All of which once again proves that social mood, not news, powers social outcomes.

Consider that oil prices actually were negative just three months ago. Now inventories are dropping and in fact there are adequate storage facilities. As predicted here two weeks ago, prices have held the $40 floor and appear headed higher.

The billions injected by the FED in bond buying are being re-cycled back into stock purchases. That probably explains the tepid performance of 493 stocks versus the seven that are up 20%. It also explains whey cable TV can claim that stocks are in a new bull market but cannot seem to take out the February highs.

For now expect the FED money to continue buying bonds. And I expect this will hold up past the election and into 2021. Spring 2021 may be a good target date for reconciliation with economic reality.

The world pandemic is what Nassim Taleb describes as a Black Swan event, an unexpected anomaly that conventional wisdom did not anticipate. Entire industries are being remade. Half of shuttered restaurants are not liable to re-open. Business travel will drop one –third to one-half declares former American Airlines CEO Bob Crandall.

K12 and Higher Ed will no doubt undergo profound changes as parents evaluate just what they were getting for the education tax or tuition dollar. The Presidential race may well hinge on the Democrats marriage with inner city teacher unions.

One last thought. Politico ran a piece suggesting Trump might go the way of LBJ in 19685. Then, a defeat by little known Eugene McCarthy in an early primary convinced LBJ to demure on the race. Trump does not see politics in a conventional liberal conservative sense. Rather he sees only winners and losers. And losing to Joe Biden who never could get nominated before would be a stunning defeat. Better to declare victory and head to Mar A Lago. And one has to wonder if Melania has not had enough of all this. No doubt she promised to go along to get along but one term may be enough. It is hard to imagine she wants four more years of press mistreatment. Dropping out at the virtual convention and handing the gavel to Nikki Haley would be a master stroke, the kind that made Donald a famous reality TV star.

DAILY OIL PRICE: August 7

  • Crude Oil: 41.22   (-0.73).
  • Nymex MTD AVG:  41.2278.
  • Natural Gas: 2.238   (+0.073).
  • Gasoline: 1.2076   (-0.0205).
  • Spreads: September/October   (-0.27)   October/November   (-0.37).
  • Plains WTI Posting: 37.75   (-0.75).
Plains All American logo.jpg