Random Thoughts - 10-17-2021

Courtesy of CDC

Covid

It's been nearly 2 years, depending on the actual start. Here is some stats, courtesy of Our World in Data...

• 47.5% of the world population has received at least one dose of a COVID-19 vaccine.
• 6.65 billion doses have been administered globally, and 20.44 million are now administered each day.
• Only 2.7% of people in low-income countries have received at least one dose.

In the USA, we have achieved 68.4% fully vaccinated of persons 18 and over, per the CDC. 

Burrowing down, indicates my state (Kentucky) has 69.86% of that age groups full vaccinated. 

• The seven day average infection rate (KY) of 1, 932 compared to average daily rate from beginning of 1,265. 
• The seven day average death rate is 34, compared to average daily rate since the beginning of 16.

I eagerly anticipated the point where the 7 day death rate falls below the "since beginning" rate. 

The average age of infection and deaths has fallen since pre-vaccination, when the death rate was primarily over 60, with 92% of deaths above that range, with above 80 counting over half of deaths, 70~80 was about 1/4 and 60~70 was about 1/7. The average age was approximately 78, with infection's average age at 44. 

Since the start, the average age of death is now 74 and infections at 40, with the 7-day age of death at 66 and infection at 37.

The good news if such a thing is possible... both infections and deaths are dropping rather fast. However, this is a global pandemic and until that low income vaccination rate above improves... another wave of some new variant is not out of the realm of possibilities. 

The WHO has decried wealthier countries with plentiful vaccine access are...

Hoarding

Tis true, but food hoarding is starting to crop up... and I don't mean just in my pantry. There are countries that are net exporters of food and countries that are net importers. Whether you believe in climate change is irrelevant at this specific point in time. Weather has wreaked havoc on food importing AND exporting countries. Importing regions such as large swaths of heavily populated countries in Asia and most of Africa

The extent is some countries are beginning to limit exports, due to their own needs, just as countries that import are facing reduced crops. 

While it is likely food shortages will occur in some areas, much higher prices will be likely for all. It is no different than natural gas, petroleum, coal, etc. 

While I have received my booster shot and have a full to overflowing pantry, does not mean I am immune to the potential of societal breakdown on a global scale. If it comes, it will be due to a dearth of leadership. It is what fills that void, that is the worry. 

Of course, I am probably over reacting and everything is hunky dory!

Things Looking Up... Maybe!

The Census Bureau just released the ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, SEPTEMBER 2021.

Last Month, I stated the little upswing in inflation adjusted numbers were not a trend. We have back to back rises, so maybe... just maybe a trend is starting to form.

Of course we had a 5 month trend from May 2020 until August 2020, before tapering off. Sometimes year over year spending is seasonal, so September is an improvement over last year. On the other hand, a couple of months uptick going into the winter months does not a booming economy make. In fact the indicators for 3rd qtr. GDP are trending downward... rather sharply, imo. 

Consumer spending has altered so much the past 19 months (yes, it has been that long), the predictability is a stab in the dark. Just how many cars, freezers, refrigerators, TVs, etc. can be purchased until the consumer's desires are satiated? How full do the pantries become, as well. At what point does inflation quell the consumer's appetite?  Is inflation encouraging spending... to get that desirable item, before the price goes up? How much forward purchasing is due to the "supply chain?"

According to the GDP, the consumer is spending 18% more (inflation adjusted) on goods since end of 2020. Of that 28.9% more on durable goods; 12.2% more on non durable goods; 3.4% LESS on services. All of which are outside normal expectations.

A thought exercise... AA store in normal times sold about 10 freezers per month and could replace those within two months. There is 20 in the pipeline and the store pays as they are delivered. Just in time. 

Due to covid, the hoarders started buying 20 freezers per month and due to the supply chain congestion, the delivery time is 6 months. AA store now has 120 freezers in the pipeline, with payment due on delivery. 

The consumer reverts to normal... AA store cancels orders for the next 10 months, but still has to pay for those 120 freezers as they are delivered. By the end of 6 months, the supply on hand is 60 in the warehouse, that have been paid for AND the supply chain has been resolved. Far fetched, but this is exactly GM's problem circa 2009.

This is a very hard landing scenario with the freezer manufacture laying off people for long periods, the store dropping prices... in an attempt to stay afloat with operating expenses, etc. These things make the consumer very edgy and resistant to spending what money they have on hand and/or going deeper in debt. 

The question becomes... how to avoid a hard landing? If I am smart enough to consider this... you can bet the FED is thinking of it as well. Raising interest rates to quell inflation that may very well BE transitory, could upset the apple cart. 

I think that is referred to as "caught between a rock and a hard place".

Interesting times.

Producer Price Index for September-2021

 

As you know by now, it was ugly for consumer's future prospects of inflation. Yes, a lot of this will get passed on to us. It is a sellers market, especially in food and energy. Here is the full report from the BLS.

From the horse's mouth...

The Producer Price Index for final demand increased 0.5 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.7 percent in August and 1.0 percent in July. (See table A.) On an unadjusted basis, the final demand index rose 8.6 percent for the 12 months ended in September, the largest advance since 12-month data were first calculated in November 2010.

Nearly 80 percent of the September increase in the index for final demand can be traced to a 1.3- percent rise in prices for final demand goods. The index for final demand services moved up 0.2 percent. 

Prices for final demand less foods, energy, and trade services moved up 0.1 percent in September after increasing 0.3 percent in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services rose 5.9 percent.

For those thinking the FED might raise rates, the highlighted number above, seems to indicate otherwise. The FED always looks at things other than food and energy to gauge the economy. 

However, note that trade services is listed in the highlighted number. The final demand excluding food and energy rose 8.3% YOY and up 0.5% unadjusted from August or 0.6% when adjusted. 

About a third of the way down the full report is final demand goods and here is a summary...

I have highlighted a few areas that are above the monthly and annual numbers. Some areas look better on the annual, but the monthly looks terrible in my opinion, and suggestive of continued inflation going forward. Energy is almost reflected in real time as we all know the gasoline prices raise immediately, so yes gasoline and energy are "volatile".

Current forecast for core PCE is 0.22% for September and 3.7% YOY. That report is due October the 29th. I place the numbers here to track any forecast changes. 

So it appears this transitory phase could last into May of 2022. But then I had previously thought the supply chain issues would be resolved and groceries prices moderating by this PAST March. 

What do I know?

Works of Fiction

From Deutsche Welle

Ran across this in Deutsche Welle... 

The fiction debut of the former US presidential candidate with mystery author Louise Penny has again stirred a discussion on what prompts politicians to write fiction.

How can I resist? Clinton and works of fiction. Politicians and works of fiction. I can find no satire tags in the article, but how can it be anything other than satire. 

So yes, I frequently observe foreign news websites, as everyone tends to favor their own government/ideology and what we see in the U.S. is not what others see. The truth generally "lies"  somewhere in the middle.

Many of those European papers are lamenting the U.S. shift to the Pacific and the need to possibly come together and form a European Union military alliance... in place of NATO.

Apparently this is due to the U.S. not seeking European consultation over Afghanistan, but rather seeking to further U.S. interests. The E.U. seemed to think that they could tell the U.S. what to do and somehow are deeply concerned the U.S. hasn't done what they are told.

Not sure how the EU arrived at their former illusion or should it be delusion. At what point did the U.S. indicate the EU held any sway over U.S. policies?

Good, bad or whatever, the U.S. under Trump stated the U.S. was leaving Afghanistan. Biden was in agreement, although attempting to blame it all on Trump. In any case, Biden made it clear the U.S. was leaving and gave hard dates. 

Granted the final exit was terrible and poorly planned, but for the EU to attempt to blame the entirety of the mess on the U.S. is ludicrous at best. These complainers had ample time to gather forces to secure a better outcome... but didn't. 

It's because they couldn't or wouldn't. Simply easier to blame someone else and say the U.S. has failed some obligation to the EU that never existed. The EU has had its weakness exposed and does not like it. There is a lot of talk, but nothing will ever come of it, imo. 

Until then, I will consider the discussion of a EU military as a work of fiction.

Consumer Price Index and Real Earnings for sep-2021

 

The BLS has released the September figures for inflation and the many headlines include...

• CPI- U:YOY increase of 5.4%
• CPI-U: Monthly increase of 0.3%
• CPI-W: YOY increase of 5.9%
• CPI-W: Monthly increase of 0.3%

This may be slightly above expectations, but not by much. I had expected the CPI-W increase of 5.9% and the C.O.L.A. at 5.9%

How does this stack up to my on cost of living over the past 12 months...

My results indicate 0.1% increase monthly and 3.3% YOY. Of course, there will be a Medicare premium increase, so that 5.9% will become more like 5.5% increase in real terms. Not bad, after years of falling behind. 

But, a lot of cost cutting took place during that period to get to my current situation. One worrying issue in my current success, is the rate of fall in Medical, which is a large portion of my expenses. I mean it is great on the one hand, but I cannot realistically rely on that becoming a long term trend. 

It should be noted that while the BLS numbers slightly exceeded the forecasts, those same forecasts project higher numbers for next month. 0.4% on the month and 5.7% on the year. Of course, the YOY is stretching back to a period of near stability in the numbers. 

Transitory, supply chain, etc. can be explained away until about February 2022. Below is an expectation of YOY inflation numbers based on two factors. The blue bars indicate the reports of yearly inflation, IF no further inflation is seen through June, 2022. November will be higher than current, before slipping back. The orange represents the yearly inflation based on a simple 0.2% increase per month (2.43% annualized). It indicates December will see a near 6.0% report, before easing back and seeing June as the timing for below 3.0% expectations.

For those drawing Social Security and having the Medicare premium withheld, the average after that premium was $1,594.50 monthly beginning in January. The erosion of purchasing power will result in a net loss of 4.11% of purchasing power ($787.30) over the year. Considering the after premium check from Social Security will be $1,687.34 starting in January... it will require 8 consecutive months of ZERO inflation to recover purchasing power back to level of January, 2021. It would require no more than 1.6% inflation through the entire year of 2022, to maintain purchasing power of January 2021. 

As for the those still in the labor force...

Real hourly earnings are on an uptick, and since the pandemic began is up 2.9%.

However...

Real weekly earnings are up 4.14% in that time period and are on an upswing... similar to hourly rates. 

Of course real earnings, are adjusted for inflation and are earnings before taxes. Just saying... it's like a treadmill at this point, imo.

Up next will be producer prices and this can give an indication of upward pressure on pricing going forward. 

Rebound or Last Gasp!

 

The Census Bureau has released the August Advanced Monthly Retail Sales. This release does not include inflation adjustments, so I have added inflation into the following graph, as well as Stimulus Payouts.

While the headlines noted a "rebound", it should be pointed out that one months does not make a trende. 5 months do appear to be trending down on both current dollar and inflation adjusted dollars.

The downward pressure continues from the Auto sector, which is down 8.0% from June. Clothing and clothing accessories down 2.7% from June. Sporting goods, hobby, musical instrument, & book stores down 4.6%. All unadjusted for inflation.

Overall, the report was down 1.1% from June... without factoring inflation, which would push it down 1.8%.

Most of that "rebound" is in the area of non store retailers, electronic shopping and mail order houses up 0.4% from June. General Merchandise stores also contributed to the "rebound" with 2.4% unadjusted for inflation.

Excluding the auto sector, the report indicated 0.077% boost over June, unadjusted. Adjusted for inflation, this sector rose 0.008%. 

I find it difficult to shoot for joy, with this report, as it appears more of a flat line with tendency downward. A lot of questions...

Is the stimulus boost waning, is it supply chain issues, is it the inflation?

Hoarding Update: 10-10-2021

 

Hoarding is a severe psychological disorder where a person gathers an excessive number of items and stores them. The reasons someone become a hoarder include altered brain connections, genetics, stress, OCD, environmental factors and altered levels of serotonin. 

I'm going with environmental as cause for mine, and genetics for my wife. 

So it is predominantly food supplies for us. I try to keep approximately 3~6 months of non perishables on hand. Replenishing these stocks on FIFO basis, does keep me busy. Freezer ready goods are mostly in the 4~6 weeks range. 

Admittedly there are some items from summer of 2020, but they are slowly being reduced in inventory. At current rate, maybe another couple of months will see replenishment at a lower pace. Refrigerated items are mostly replaced on a weekly basis.

Kroger, Walmart and Amazon are the principle curbside visits. There may be items missing one week, but generally in stock the following... thus far. No reason to panic, although some of the food choices by this method can be boring. Restaurant delivery, drive thru, or curbside seems to alleviate some of those urges. 

Staying warm...

With food in "good" supply, what about staying warm? It's either going to be warmer than normal or colder. It's either going to be wetter than normal or drier. Then there is the time period potential for all those swings. 

Ice is the wild card and could do lengthy damage to transmission lines, etc. In an all-electric house, that could be a factor. However, not going to go nuts over generators, etc. I could say blankets would be the way to go, but sitting around the house staring at each other could lead to altered brain connections and stress. Not to mention cold food and losses in refrigeration. Might need to rethink this whole thing. 

A long term freeze out might not be in the cards, as I do live in an area where high energy industries have priority on restart, imo. 24~48 hours at the most... I hope. There could be possibility of outages from transmission lines to substations and from there to individual neighborhoods. My neighborhood and the surrounding are buried lines... but are fed by overhead lines from substations. Again, the transmission lines to heavy usage industries will reduce the outage time, even to our feeder substations, etc. Or it should.

Food...

There may be plenty of food and access to food, but what about ice storm related outages? Restaurants and grocery stores might be down as well. I do have a gas grill, so some relief in that area, although trying to grill in such temperatures could be a challenge. I'll try if necessary. Otherwise... cold canned goods, snacks, etc. 

Now I'm working up some stress. Time to chill! After all, it is over 80ºF outside.