What did I say on Wednesday?
To tell you the truth, I don’t remember — or at least not all of it. I say quite a bit each day, and although my synapses are more than a half-decade removed from my last Balvenie, I’ll confess that on some days, I look back at articles penned just 48 hours previous and think “Wow, that was just two days ago?”
But that’s the nice thing about keeping a running, written record of daily musings. You can always just take a look at what you said, and revel in the times you were right. Or wince at the times you were wrong. Whichever the case may be.
Well, 48 hours ago, when US retail sales came in flaming hot, it turns out I wrote the following:
At the risk of overstating the case, this looks like a barnburner. And it should bolster the reflationary vibes.
If this is what happens when incremental stimulus is injected into an economy that’s still partially hamstrung by COVID containment protocols and remains 10 million jobs short of pre-pandemic levels, then it’s not difficult to posit that more stimulus hitting just as the re-opening push gets underway in earnest and virus caseloads plunge, could lead to some pretty hot reads on activity.
To be sure, some of the good vibes engendered by the fourth-best monthly retail sales print on record (figure below) were muted by a disconcerting rise in jobless claims, but nevertheless, my assessment had some merit, I think.
In the latest edition of the bank’s popular weekly “Flow Show” series, BofA’s Michael Hartnett echoed my sentiments from Wednesday. Almost verbatim.
Hartnett called the monthly gain denoted by the red dot in the figure (above) the “mother-of-all retail sales.” For context, note that there were two better monthly reads in 2020, but they came during the rebound from the lockdown plunge, so they’re essentially outliers.
“The epic January 2021 retail sales [data is an] absolute game-changer,” Hartnett declared, citing a hot early-1994 nonfarm payrolls report as a possible historical analog.
That “ended [the] early-90s ‘jobless recovery,’ incited Fed rate hikes, and [a] bond bear which ended with [the] Orange County and Mexico busts,” he went on to say, adding that, January’s retail sales showed stimulus checks are “spent not saved.”
“If $600 equals 6% retail sales, just think what $1,400 will do,” Hartnett remarked. Again, that was precisely my assessment from Wednesday.
The apparent “success” of the $600 checks (and any economic encore following the distribution of another $1,400) could “incentivize bolder fiscal excess,” BofA went on to note, citing child tax credits and student debt forgiveness, and cautioning that such “excess” may “kick-start macro volatility.” The market, Hartnett said, “can likely no longer assume tame CPI” which could hit 4% (YoY, obviously) as soon as the second quarter.
“Nothing is so permanent as a temporary government program,” he added.
The main issue to focus on here, is hot retail sales that don’t need support from low wage earners. Going forward, the pandemic has supercharged AI, robotics and general corporate greed — and thus the realization that efficiency/productivity and revenue all can occur without all those people waiting for a phased-in minimum wage of $15/hr.
That sad fact is also connected to the booming real estate markets, where lower wage people don’t matter in terms of market growth.
The multi-decade wage stagnation and income inequality reality of the past is thus an inconvenient nagging nuisance that doesn’t matter too much to anyone, except the millions of people being discarded. Those people are also the recipients of on-going stimulus, often, because they’re old, unhealthy, uneducated and thus lacking skills to compete with robots — drug addicts, criminals and the dregs of society who don’t fit into the new wild west of stock speculators.
The only thing different about today and the lingering decay of the GFC is that this new recession and recovery has apparently happened within months versus years, and the people on the lower rungs of the economic ladders are being discarded at a far faster rate. Although stimulus is still in the spotlight to help support some people, once it does fade away, these people on life support really have no way forward.
A jobless recovery going forward will cause more inequality, homelessness, crime, healthcare problems, addictions and various maladies that have kept many of these people frozen in time. Instead of making economic progress in terms of social value, we seem destined to pay a price for ignoring the cancer-like decay that’s not only on the horizons, but at our feet.
Maybe in time things will get better, maybe trump will become like Teddy Roosevelt, giving us a modern Bull Moose Party, which will blow apart the GOP, while in time a new Franklin Delano Roosevelt, will emerge — reshaping our society into something better — perhaps a society that doesn’t discard millions of its citizens.
Sorry to rant.
10yr yld has been moving up almost one point every 24 hours so far this year. I might start buying CDs again by summer 😉
In the spirit of BAML observation, what chance is there for one of JayPo’s infamous 180 degree pivots where he “gently” discusses a timetable for merely a signal that the Fed is ready to scale back thier monetary accomodation. May 22, 2013 is ringing in my ears
Maybe the $600 was spent and not saved because it had to be, people were that broke. Maybe the $1400 won’t all be spent because are scared.
Maybe the $600 was spent because people were confident that the $1,400 was on its way. It seems very likely that people will be more cautious with the $1,400 check than they were with the $600. With the $1,400 they may be very cautious as there is no more stimulus in the pipeline.