Who should bear the cost of a public good?

David MoonBlog

I watched with passive curiosity as the Knox County Board of Health closed local bars, then allowed them to reopen with a 10:00 pm curfew. If Knoxvillians understand that our public health requires the complete or partial closure of bars, it is a great opportunity to put our collective money where our mouth is. A person may feel virtuous when he proclaims that COVID-19 is health or science issue, not an economic one, but money is simply a tool we use to express our values. Of course, this is an economic problem. For a moment, forget about infection rates, case … Read More

Everyone is a risk manager

David MoonBlog

Prior to this year, the Dow Jones Industrial Average (DJIA) had never declined more than 1,000 points in a day. Then came COVID. Within a single week in March of this year, the index dropped more than 2,000 points three times, culminating with an almost 3,000-point drop on March 16. In three miserable days, the index dropped a total of 30 percent. By the end of July, the DJIA had recovered 6,240 points, or more than 30 percent. Quiz: at which point were stocks riskier, March 16 or July 31? If you answered March 16, you don’t understand risk. For … Read More

Seeing downtown with new eyes

David MoonBlog

Because of some work being done on my house last week, I moved into the Embassy Suites on Gay Street and became a downtown dweller for 10 days. It was fun and educational, but not the least bit tempting. For 35 years I’ve had a downtown office. I parked in a garage underneath my building and eat lunch at my desk. I think I work downtown, but it’s really more like working in a studio, with Gay Street as my virtual background. I didn’t fully appreciate the difference until last week. There is a downtown energy that doesn’t exist in … Read More

Looking ahead to second quarter GDP

David MoonBlog

When the Bureau of Economic Analysis releases its first estimate of second quarter U.S. economic growth (negative growth, that is) next week, the figure will be a record quarterly decline. Other than that, we don’t yet know much about the details of the drop. The experts’ estimates, usually tightly gathered around the same figure with decimal precision, range from -16 percent to -52 percent for the three months ended June 30. That is, no one has a clue. JP Morgan’s prediction is one of dozens of examples of forecasting futility. Within a three-week period from mid-March to early April, the … Read More

Some musings about money

David MoonBlog

I’ve observed that the three most intimate things in most people’s lives are their spirituality, their sexuality and their money. And people will typically tell you what they think about God and who they sleep with more quickly than they will share their tax return. As a result, I’ve learned quite a bit about human nature in 35 years of working with people and their money. Popular opinion to the contrary, I don’t think that money is the most common cause of friction between married couples. When people fight about money, they aren’t fighting about money. Money is a convenient … Read More

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