Episode 31: Stayin' Alive
The number of Americans who filed for first-time unemployment this week totaled 885,000, an increase of 23,000 from last week. In all, 20.6 million Americans were receiving unemployment benefits at the end of November. A recent report found that about 8 million Americans have fallen into poverty since the summer. This shocking stat belies progress in the poverty rate over the last five years, from 14.8% in 2014 to 10.5% in 2019. According to the US Census, in 2019, 34 million people were living below the federal poverty line, which is $26,000 for a family of four. Today, the total number of people in the US living in poverty is 55 million. In the spring, the federal stimulus saved about 18 million Americans from poverty, but as those funds evaporated, that number is down to 4 million. Several aid programs impacting 12 million people expire the day after Xmas unless Congress passes another stimulus bill. Congress is scrambling to push through new legislation to aid individuals and businesses before year-end. According to Mitch McConnell, a $900 billion bipartisan bill is days away from passing and includes the following components:
Direct payment of $600 for people earning under a certain income threshold (the amount was $1,200 in April)
Additional funding of PPP for small business
Supplemental federal unemployment benefits of $300 per week (the figure was $600 in April)
Extension of eviction moratorium
Funding for vaccine distribution and schools
The plan’s two missing components are liability protection for businesses (Republican wish) and funding for local and state governments (Democrat wish).
The Central Bank is doing its part to support the nation’s economic recovery. The Federal Reserve Chairman, Jerome Powell, announced his committee would keep interest rates near zero through 2023, and the federal banking system will continue buying Treasury bonds until the US reaches full employment and inflation settles at 2%. (The Board of Governors of the Federal Reserve System, commonly knows as the Federal Reserve Board, has seven members nominated by the President and confirmed by the Senate, each serving 14-year terms.) Chairman Powell said he sees economic activity recovering but “well below” the pre-pandemic level. He expects the pandemic will “continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.” This week the Fed gave a sanguine forecast: GDP will fall by 2.4% this year but grow 4.2% in 2021; the unemployment rate will fall from 6.7% today to 5% in 2021, with inflation rising to 1.8%.
Retail sales fell 1.1% in November, signaling a weak start to the holiday shopping season. It was the most significant drop in seven months and a steeper decline than economists expected. Black Friday was also a bust. Typically one of the busiest shopping days of the season, shoppers stayed home after health officials warned people not to shop in person. Consequently, half as many people shopped inside stores this Black Friday vs. last year. With COVID cases spiking across the country, economists expect retail sales to fall again this month as public fears and local restrictions increase. Retail has been hit hard by the pandemic and accelerated trends towards e-commerce. Pier 1, J.C. Penney, Brooks Brothers, and Francesca’s all filed for bankruptcy this year. It’s been interesting to observe the retail trends. Hot categories include real estate, home improvement, outside heaters, fire pits, outdoor sports gear, throw pillows, candles, air filtration systems, alcohol, and homebrew kits. Americans are prioritizing their dwellings and stocking up on nesting supplies. I’m not sure how to explain the spike in baby chickens and Lasik surgery, but the latter is likely a response to masks and foggy glasses. The retail categories that have not fared well include sun care products and chewing gum. Fewer trips to the beach mean less sun exposure, and, for some, mask-wearing must alleviate the need for fresh breath!
In a sign that consumers are less willing to spend, the Consumer Confidence Index fell to 96.1. (The consumer confidence index is based on consumers’ outlook for the future and set on a scale with 100 equaling the confidence level in 1985.) At the start of the year, with the country enjoying unemployment at a 50-year low of 3.9%, the confidence index was 132.6. The index plunged to 85.7 in April once millions of Americans lost their jobs and the nation went into lockdown. Consumer confidence is a critical measure of the overall economy because consumer spending accounts for 70% of the US’s economic activity.
Of course, e-commerce is exploding. Almost a third of the world’s population is now buying online. The number of overall online buyers is forecasted to reach 2.1 billion in 2021, up from 1.6 billion in 2016. And the total e-commerce market is expected to double from $3.5 trillion in 2019 to $$6.5 trillion in 2022. (As a percentage of total global retail sales, e-commerce sales have increased from 7.5% in 2015 to a forecast of 25% in 2023.) Amazon is the dominant e-commerce company in every country except for China, where Alibaba reigns and Amazon is nonexistent. Amazon ships to 130 countries but the US, Germany, UK, and Japan are Amazon’s biggest markets, representing 89% of global net sales. Amazon shipped approximately 7 billion packages worldwide in 2019, either directly or from its marketplace sellers, equivalent to nearly one package for every person living on Earth. Unfortunately, Amazon is also responsible for 465 million pounds of plastic packaging waste LAST YEAR! According to a new Oceana report, an estimated 22 million pounds made their way into freshwater and marine ecosystems. Keep this in mind when you applaud Jeff Bezos’ $10 billion “Earth Fund” to combat climate change. Jeff Bezos is the world’s richest man with a fortune of $182 billion.
Bitcoin finally broke above $20,000 for the first time and didn’t stop there, topping $23,000 this week. Bitcoin is now up more than 200% for the year. Bitcoin, a form of money that exists only digitally, started in January 2009 during the financial crisis’s depths and was positioned as an alternative to government-backed money. It operates across a network of linked but independent computers that can’t be controlled by a single party, such as a central bank. Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed bitcoin, and as part of the implementation, devised the first blockchain database. Nakamoto designed Bitcoin to have a fixed supply of 21 million that would make it resistant to inflation.
Investors in Bitcoin claim it’s an insurance policy against currency devaluation. Central banks worldwide are running massive deficits and embracing stimulus and aggressive monetary policy to combat the pandemic, among other societal ills. In the US, the Federal Reserve is compressing interest rates and buying bonds to increase the money supply to support higher inflation. Therefore, investors have been willing to test bitcoin as a hedge on inflation. However, its potential has been difficult to gauge because inflation hasn’t reached the Federal Reserve’s target of 2% in years.
Bitcoin traded above $19,000 in 2017 before collapsing to $3,000 in December 2018. Crypto evangelists claim the 2020 rally is different since the buyers are institutional vs. retail. This year’s rally has attracted a wide cast of characters, from the Wall Street billionaires Paul Tudor Jones and Stanley Druckenmiller to large financial companies like PayPal and Fidelity to momentum investors who aim to ride winning assets higher. Bitcoin supporters also argue that two years ago, there were few outlets for trading beyond startup exchanges with an uncertain regulatory backstop, most of the buying was retail investors, and bitcoin had little practical value. Today, credible trading platforms like S&P Global and CBOE Global Markets are making a big push into crypto market data services. S&P Dow Jones Indices will offer crypto indices in 2021. The largest cryptocurrency exchange Coinbase has filed with the SEC to go public through an IPO. Plus, state and federal agencies, including the Internal Revenue Service and the Securities and Exchange Commission, have laid out rules for cryptocurrencies.
Is Bitcoin a bubble? That’s the $23,000 question. One analyst is calling for Bitcoin to reach $60,000 next year. Guggenheim’s global chief investment officer, Scott Minerd, said bitcoin would surge to $400,000 based on its scarcity and value relative to gold. FOMO (fear of missing out) is a powerful human trait and one reason for the asset’s escalation, but critics warn of the risks with speculative investing. Bitcoin’s history shows precisely how volatile and risky it can be for investors. As Mark Twain said, “history doesn’t repeat itself, but it often rhymes.”
The US set new daily records for COVID cases (247,403), hospitalizations (113,090), and deaths (3,448) this week. California is exploding with COVID, with over 50,000 cases registered in a single day, more than the UK, France, and India. The spikes are a troubling sign for the holidays, as 84 million are expected to travel, 3 million by air. Retail restrictions, closures, and curfews continue to escalate across the country to curb the infection rate. However, there is growing frustration with some politicians’ “whining and dining.” Gina Raimondo (Democrat), the governor of Rhode Island, called for her state’s residents to hunker down and stay at home to stop the spread of COVID. She was photographed days later at a wine and paint night without a mask. House Speaker Nancy Pelosi and California Governor Gavin Newsom, both Democrats, faced similar public backlash for hypocritical actions.
The FDA has been busy this week. The agency issued the first emergency use authorization for an over-the-counter, at-home coronavirus test. The self-administered antigen test comes with an electronic analyzer and companion app and renders test results in 15 minutes. The efficacy of the device and the trial is 95%. Ellume, the Australian digital diagnostics company behind the test that retails for $30, hopes to scale manufacturing to 100,000 per day by January and deliver 20 million units to the US in the first half of 2021. Yesterday, the FDA advisory panel convened and endorsed Moderna’s COVID vaccine, and tonight the FDA is expected to approve the vaccine, and 5.9 doses will start shipping this weekend. Moderna, short for modified RNA, is a biotech company based in Cambridge, Massachusetts. Established in 2010, Moderna has never brought a product to market and never made it past phase 2 clinical trials. Still, the company has developed the COVID vaccine in cooperation with the National Institute of Health (NIH) and the National Institute of Allergy and Infectious Diseases. Moderna’s vaccine was the first green-lit for clinical trials by the FDA on March 3rd, and the first government-funded Phase 3 clinical trial in the US. The government initially purchased 100 million doses of Moderna’s vaccine (enough to inoculate 50 million people) and bought another 100 million last week. Moderna and Pfizer’s vaccines are similar in that both are messenger RNA vaccines and 94% and 95% effective, respectively. The Moderna vaccine can be stored in a standard freezer, and the vaccine is administered in two 100-microgram doses 28 days apart. Pfizer’s vaccine must be kept in special freezers with dry ice at -75 degrees and comes in two 30-microgram doses 21 days apart. Children under 16 are not authorized to receive either vaccine. For a full list of questions and answers about the new COVID vaccines, click here.
African Americans and Latinos are almost three times more likely to die from COVID than whites. Unfortunately, surveys show African Americas are among those most reluctant to get vaccinated. For this reason, Sandra Lindsay, an African American nurse, was the first American to receive the Pfizer BioNTech vaccine on Monday. The second American to be vaccinated, Yves Duroseau, an African American doctor. Health officials hope the optics will encourage skeptical African Americans to get inoculated. Across all Americans, distrust of the vaccine remains high but has declined, with 60% of Americans questioned said they would definitely or probably get vaccinated. That figure was 51% two months ago. However, only 42% of Black people surveyed said they would get inoculated, according to the Pew Research Center. Sadly, much of the skepticism traces back to the history of conducting medical experiments on Black people. The most notorious was the Tuskegee experiments in Alabama between 1932 and 1972, when white researchers used unwitting black men to study the effects of syphilis.
On Monday, the Electoral College formally confirmed Joe Biden’s victory in the November election with a 306 to 232 win. The next step in the process is to go to Congress, where VP Mike Pence will count the Electoral votes and announce the results on January 6th. On January 20th, the Supreme Court’s Chief Justice will swear in the President-elect as the 46th President of the United States. President Trump continues to contest the election results. However, he suffered a clear and decisive defeat when the conservative-leaning SCOTUS rejected a Texas lawsuit seeking to overturn the election results. Even Trump’s staunchest allies are distancing themselves from the situation. Attorney General William Barr said he would step down on December 23rd. Barr angered Trump and his supporters when he commented in an AP interview that he saw no evidence of widespread voter fraud in the November election. Republican Majority Leader Mitch McConnell congratulated President-elect Joe Biden on the Senate floor for his election win.
The only election news that’s relevant at this point is in Georgia. The all-important runoff election for two Senate seats set for January 5th in the Peach State began early in-person voting this week, with more than 1.1 million votes already cast. Jon Ossof (D) and Raphael Warnock (D) are challenging incumbents David Perdue (R) and Kelly Loeffler (R), respectively. Perdue has served as a US Senator since 2015. Brian Kemp, the Republican Governor of Georgia, appointed Loeffler to the Senate in December 2019, after Republican Senator Johnny Isakson resigned for health reasons. Republicans need to win at least one of the runoff races to retain control of the Senate. The runoff elections have seen a record level of spending on advertising, approaching half a billion dollars. At this point, 24,000 residents who did not vote in the presidential election have voted in the Senate runoffs.
Amazon’s Zoox unveiled its driverless electric vehicle. The “carriage-style” vehicle, which reminds me of a gondola lift at a ski resort, is an all-electric four-wheeler that seats up to four people and can operate 16 hours on a single charge and travel up to 75mph. Walmart plans to use fully-autonomous vehicles to make deliveries starting next year. Singapore has plans to host the world’s first electric-powered air taxi service by the end of 2023. Tickets for a 15-minute trip costing $364 are already on sale. And not to be outdone, China became the third country behind the USA and Russia to land an (uncrewed) spacecraft on the moon and collect samples and return safely to Earth. The last space mission to the moon was the Soviet Union’s mission in 1976.
Researchers from a non-profit group, Conservation International, discovered 20 new plants and animals in the Bolivian Andes. The new species include the lilliputian frog, the Bolivian flag snake, and the Adder’s mouth orchid. The team also rediscovered four species thought to be extinct. I love and am amazed that we are still discovering species on our planet. Giannis Antetokounmpo, the Greek prodigy born to Nigerian parents and drafted by the Milwaukee Bucks in 2013, signed the largest contract in league history at $228 million over five years. Giannis is the two-time MVP of the NBA and last season averaged 30 points, 14 rebounds, and six assists per game. Cleveland’s baseball team announced it would abandon the name “Indians” in its title after the 2021 season, based on concerns from Native Americans that the name is racist.
Pacific Islanders wishing for a white Xmas received an early present this week when an 18-foot fiberglass ghost boat containing 649kg of cocaine, with a street value of over $80 million, washed ashore in the Marshall Islands. The cocaine was sealed and wrapped with the label “KW” printed on each package. Officials believe the boat likely drifted from Central or South America across the Pacific, a nearly two-year journey based on currents. Police claim the drug haul was incinerated aside from two packs held for further analysis. I’m guessing the “analysis” will occur at the company holiday party.
I. Below are the articles I found interesting the past week:
Lessons from the Dr Jill Biden controversy
A political obituary for Trump
Families flock to the Nashville for good schools, low taxes and southern charm
II. Stats that made me go WOW!
- Amazon’s air pillows create enough plastic waste each year to circle the Earth more than 500 times, according to an Oceana report.
- A NY Times reporter spent 10 Bitcoin on a sushi dinner back in 2013. Those Bitcoin would be worth more than $200,000 today.
- MacKenzie Scott, formerly married to Jeff Bezos, is the world’s 18th-richest person, with a net worth of $40 billion. She has gifted almost $6 billion this year to a variety of non-profit organizations.
- Pinterest agreed to pay $22.5 million in a gender discrimination suit. The former COO Franciose Brought sued the company, accusing her male colleagues of edging her out of meetings and giving her gendered feedback.
III. Name that Tune!
As I write this email, I am listening to Stayin’ Alive by The Bee Gees.
The Bee Gees is a trio of British-born brothers, Barry, Robin, and Maurice that formed a music group in 1958. The brothers, including youngest brother Andy, spent their youth in Australia, where they launched their music career. The band stood at the forefront of the disco era from the mid-to-late 19070s, but the music transcended generations. The Bee Gees have sold over 120 million records worldwide and the third most successful band in Billboard charts history after the Beatles and the Supremes.
The song Stayin Alive was written as the soundtrack to the megabit motion picture, “Saturday Night Fever,” starring John Travolta. Stayin Alive is number 189 on the list of Rolling Stone’s 500 Greatest Songs of All Time. The Bee Gees wrote all of their hits and produced music for other artists such as Barbara Streisand, Frankie Valli, Dionne Warwick, Kenny Rogers, and Dolly Parton. Sadly, Barry is the only surviving brother. Andy struggled with drug and alcohol problems and died in 1978 at 30. Following Maurice’s death in 2003 at the age of 53, Barry and Robin retired the group’s name after 45 years. Robin died from a long battle with cancer in 2012 at the age of 62. Brian Wilson, frontman for The Beach Boys, inducted The Bee Gees into the Rock & Roll Hall of Fame in 1997.
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