Economy expectations vary widely

David MoonBlog

During the first quarter of 2020, the U.S. economy shrank 5.0%, its worst three-month decline since an 8.4% drop in the fourth quarter of 2008. The 2008 drop occurred throughout the three-month period, as one would expect in a normal recession. The drop in the first three months of this year, however, occurred in only the last two weeks of March, equating to a weekly decline almost four times that of the worst quarter during the Great Recession of 2008-09. Investors react to surprises, which is why the Dow Jones Industrial Average collapsed more than 10,000 points over 21 trading … Read More

Happy Birthday America

David MoonBlog

Dear USA, I’m sorry we had to cancel all the birthday parties this week, but I’m sure you understand. Growing old can be hard; it’s not for the weak. Year 243 made that abundantly clear, didn’t it? But there is no way you look 244. Even with everything currently on your plate, you’re more mature and have accomplished so much more than either of your neighbors. I know things are difficult right now, but you’ve gone through a lot worse. People are comparing now to when you were 192. Coronavirus, riots and general dis-civility are bad, but they fortunately pale … Read More

The Socialist Republic of Knoxville?

David MoonBlog

The city of Knoxville received an additional $2.2 million in federal aid this week for its COVID-19 Housing Assistance Program, designed to assist Knoxville renters and homeowners with current and overdue housing payments. I generally believe that if a person obligates himself to do or pay something, he needs to be personally responsible for following through on his commitment. The current situation is unique, however, in that there are people who cannot make their housing payments solely because of the actions of federal, state and local governments. Landlords and lenders shouldn’t bear, without recourse, the cost of these unpaid payments. … Read More

COVID exposes “naked swimmers”

David MoonBlog

In 1918, 22-year-old Walter Jacobs purchased 12 Ford Model-Ts and begin renting them to Chicagoans interested in a day or two of horseless carriage fun. Five years later, he sold the company to John D. Hertz, who, within two years, created the nationwide automobile rental industry. A month ago, the 102-year-old company filed for bankruptcy, blaming COVID-19 for its inability to pay its bills. The coronavirus didn’t kill Hertz. Poor capital allocation, evidenced by a whopping $18.7 billion in debt (and only $1 billion in cash), was the company’s downfall. The coronavirus merely exposed the company as a financial house … Read More

Is recent Wall Street optimism justified?

David MoonBlog

COVID-19 has dealt another blow to the credibility of experts – this time embarrassing the collective wisdom of labor economists. The consensus economic forecast was that the U.S. lost another 7.5 million jobs in May. Instead, reported non-farm payrolls actually increased by 2.5 million. Not only did the experts miss the target by a factor of four, they couldn’t even accurately forecast the direction of the change. A record change, in fact. The 2.5 million jobs added was the single largest monthly increase on record. Undeterred by the failure of experts to accurately guess whether employment was increasing or in … Read More

Virus experts should admit mistakes

David MoonBlog

When recently asked to speculate when the COVID-19 case count might support fully reopening his state’s economy, New York Governor Andrew Cuomo offered a candid response. “All the early national experts [were saying], ‘here’s my projection model; here’s my projection model.’ They were all wrong. They were all wrong.” That’s okay; people make mistakes, especially in rapidly changing complex systems. I speak with much personal experience in this regard. If an investor lets his ego attach to his decisions, he is likely to compound his loss by denying the mistake or changing his premise. The same is true of epidemiologists … Read More

Parsing the prose of the pandemic

David MoonBlog

The phrase “social distancing” is a horrible misnomer. What authorities are encouraging is physical distancing. Or antisocial positioning. But “social distancing” is an oxymoron, much like “jumbo shrimp” or “fire department.” Where is George Carlin when we need him? I miss the phrase “flatten the curve.” For a while, it was everywhere. It has fallen out of favor with the media and authority class. Mission creep has morphed that logical, easy-to-understand term into something analogous to “you are a selfish science denier if you want to go back to work or question the ever-changing and often contradictory advice of the … Read More

Virus response pushes rates near zero

David MoonBlog

When all the stages of lockdown end, many of the new economic realities will be obvious. Massive unemployment, fewer small businesses, reduced tax revenues in government coffers and a ballooned national debt. We are also going to have interest rates that generally hover near zero. The interest rate aspect doesn’t yet receive the attention it deserves, likely because no one has any real-life experience with zero percent rates in the U.S. The implications are not all positive. From a macro standpoint, zero percent rates deprive the Federal Reserve of one of its most used (and effective) economic tools. Historically, central … Read More

When will “this” be over?

David MoonBlog

For decades, the most common question I have been asked in business-ish settings has been “what is the stock market going to do this/next year?” That question has now been supplanted by “when do you think this will be over?” Fortunately, I can use the same answer for either question: I don’t know. Part of the difficulty in answering the new question is knowing exactly what “this” is. When will this be over? The lockdown? The yet-to-be-declared recession? The bear market for stocks? New coronavirus infections? New COVID-19 related deaths? Even with a clear definition of “this,” however, no one … Read More

Moon bullish on America

David MoonBlog

A number of recent editorials have suggested that one potential silver lining to the novel coronavirus is that it will serve as a collective wake-up call, inspiring behavioral changes that will save America from its current destructive downward societal path. One writer in Knox News described America as a real mess, lamenting that the outlook is grim indeed. There is never a shortage of things to correct in any system, whether it is a country, business or family. There are plenty of things I would change in this country if I was king for a day. But to describe the … Read More