The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Invest with smart knowledge and objective odds

THE DAILY EDGE: 6 OCTOBER 2020: All Good!

U.S. Services PMI: New business growth accelerates to fastest since March 2019

September PMITM data signalled a solid upturn in U.S. service sector business activity, albeit one that was slightly slower than August’s recent high. The expansion was largely driven by a faster rise in new business. Quicker growth in new sales was supported by another strong increase in foreign client demand. As a result, employment growth remained historically marked, with firms mentioning strains on capacity. Business confidence, however, sank to a four-month low amid concerns regarding the coronavirus disease 2019 (COVID-19) pandemic.

Input costs rose at a strong rate, but one that was outpaced by the increase in selling prices, as firms passed on higher costs to clients.

The seasonally adjusted final IHS Markit US Services PMI Business Activity Index registered 54.6 in September, down slightly from 55.0 in August, but matching the earlier released ‘flash’ estimate. The solid rise in business activity was commonly linked to stronger demand conditions. The rate of growth was the second-fastest since March 2019 and solid overall despite softening from that seen in August.

image

The rate of new business growth accelerated in September, as the respective seasonally adjusted index moved further away from April’s nadir. The strong expansion was the sharpest since March 2019, as total new sales were boosted by strengthening customer demand. The upturn was aided by a fourth successive monthly rise in new export orders. Moreover, the expansion in foreign client demand was the second-strongest since data collection for the series began six years ago.

In line with greater new business inflows, firms increased their workforce numbers in September. The rate of job creation was strong overall and the second-quickest since February 2019, as many firms stated that insufficient capacity to process new orders had driven hiring.

At the same time, backlogs of work rose for the third month running and at a solid pace.

Meanwhile, input costs increased at a sharp, albeit softer pace in September. Service providers noted that higher input prices were due to greater wage and equipment costs, with many highlighting the uptick in PPE prices. The rate of inflation was faster than the series trend and among the quickest since November 2018.

Reflecting higher input prices and sharper new business growth, firms were able to pass on cost burdens to their customers through greater output charges. Selling prices rose at the fastest rate since September 2018 and outpaced the rise in cost burdens, as firms took advantage of stronger demand conditions.

Nevertheless, business expectations regarding the outlook for output over the coming 12 months slumped at the end of the third quarter. Although optimistic of a rise in business activity, hesitancy among service providers reportedly stemmed from concerns relating to the ongoing COVID-19 pandemic and the impact on future demand.

The IHS Markit Composite PMI Output Index* posted 54.3 in September, down fractionally from 54.6 in August. Manufacturing firms registered the fastest increase in output since November 2019, as service sector companies noted a solid rise in activity.

image

New business rose at a sharper rate in September, as service providers recorded the strongest expansion in client demand since March 2019. New export orders also rose modestly at private sector firms.

Meanwhile, pressure on capacity largely drove a further rise in workforce numbers, with both manufacturers and service sector firms expanding their staffing numbers.

Nonetheless, concerns surrounding the upcoming presidential election and the ongoing COVID-19 pandemic weighed on business confidence, which slumped to a four-month low.

Finally, selling prices rose sharply and at a faster rate than input costs as firms passed higher input prices on to clients.

Remember that PMI surveys are diffusion indices. The chart below illustrates how weak consumer expenditures on services (some 50% of GDP) remain. From February, spending on goods rose $257B (+5.6%) but services sank $765B (-7.4%).

fredgraph - 2020-10-06T070600.383

Second Covid-19 Wave Rolls Through Europe Rising hospitalizations and deaths are prompting governments to impose more restrictions, from travel bans in Madrid to the closure of bars in Paris.

Confirmed cases in France, Spain, and the U.K. are now higher on an average day than at the peak of this spring’s emergency, although the trend also reflects better detection of the virus. Infections also have accelerated in Italy and Germany in recent days.

The health crisis isn’t as acute as in March and April, when hospitals in the worst-hit regions of Italy and Spain didn’t have enough intensive-care beds to treat all severely ill Covid-19 patients. But European authorities are worried that the strain on hospitals could return.

European governments, anxious to sustain the continent’s economic recovery from its sharp contraction this spring, continue to rule out a return to full-blown lockdowns and are relying on lighter restrictions on socializing and movement.

French official Monday announced new restrictions in the Paris region, where infections are rising quickly and some 36% of life-support beds are occupied by Covid-19 patients. (…)

Italy has been alarmed by a sudden surge in daily infections to over 2,600, compared with levels of roughly 1,500 for much of September. Most people currently testing positive have mild or no symptoms, but the number who need hospital treatment is rising. (…)

New Covid-19 cases in Germany, which have been trending slowly up since mid-July, rose sharply last week, hitting 2,731 on 1 Oct., the highest level since April. Germany’s disease-control agency, the Robert Koch Institute, said parties and family gatherings, including weddings, birthdays and funerals, were the main sources of new infections. (…)

Spain, which has been struggling to contain Europe’s biggest outbreak, is recording more than 10,000 daily cases on average, a more than 10-fold increase since July. Deaths from Covid-19, which during the summer rarely exceeded 10 a day, have risen to more than 120 a day.

In Belgium’s capital of Brussels, hospitals over the weekend began redirecting coronavirus patients to other parts of the country, to keep beds free for patients with conditions other than Covid-19. The number of daily new infections in Belgium has surpassed 2,000, up from around 500 a day in August.

The U.K. recorded on average more than 8,500 cases a day over the seven days through Oct. 1—five times the rate recorded a month earlier. In that time, hospital admissions have tripled to around 380 a day and deaths have risen to 40 a day from fewer than 10.

daily-covid-cases-deaths

Image

8_US Cross Curves (11)

8_US Cross Curves (12)
UNTWITTY TWEETS

Richard Bernstein (@RBAdvisors) asks: “#COVID19 cases are rising now in 38 states. Can US #economy hit on all 8 cylinders as many expect when people are increasingly sick? Our cyclical/defensive barbell seems appropriate.”

But Cornerstone Macro’s Nancy R. Lazar (@NancyRLazar1) argues that weak consumer demand, 68% of GDP, will be offset by increased capex. “Capex is rolling. Core cap goods shipments are on track to soar 31% q/q a.r. in 3Q, even if they’re flat in Sep. That will help offset any consumer sluggishness, if there’s no Phase 4 deal. Why is capex so underappreciated?” With these supporting charts:

image

image

My observations:

  • Reproducing the 1950-1980 capex boom is unlikely given that corporate America is currently producing at 70% capacity, in a constant downward trend since 1973 (88%). A rate of 85% is optimal for most industries.

fredgraph - 2020-10-05T152129.846

  • Industrial production shows no signs of acceleration from a very tepid pace since 2000:

image

  • Low utilization and low demand need no increase in capacity which, what the U.S. got since 2000:

image

  • Declining capacity utilization has been broad and significant, except in crude processing, not an obvious future high growth sector. The Energy sector is 26% of total U.S. IP.

 image image

  • Of the 74% non-energy IP, automotive is 5.5%, construction 5.4%, biz equipment and supplies 14%. High-tech? 1.8%! (More data? Here)

Let’s hope Nancy is right but the odds are not good.

ALL GOOD!

Yesterday was an “all good day”, starting with Trump’s youth cure while easily fighting COVID-19 with his 7 private doctors in his hospital suite.

Then Bloomberg’s Michael R. Strain took care of the K-shaped recovery: “As in the past, K-shaped recoveries should end well for everyone. It’s normal for rebounds to help the affluent first, but lower-income households will catch up as the economy starts expanding. Still, that shouldn’t be an excuse for Congress to be complacent about its obligation to spend money now to support struggling families and businesses.” Never mind there are still 26M Americans unemployed on the lower leg of the K.

But, heck, equities jumped yesterday, led by small caps, up 2.3% and microcaps, up 3.0%. Why?

  • “a clear-cut Joe Biden win is emerging as a bull case for stocks. With the challenger’s lead widening in the polls and Trump’s campaign sidelined, investment strategists now say there’s less of a chance for a contested election. That would avoid a long and messy legal battle and provide certainty to markets, according to strategists from Citigroup to JPMorgan. (Bloomberg)
  • No worries, a blue wave will prove bullish:

First to reassure us is Goldman Sachs who says “the polls suggest a “blue wave” in which Democrats gain unified control of Washington is becoming more likely” and promptly makes sure we don’t worry about that:

All else equal, such a blue wave would likely prompt us to upgrade our forecasts. The reason is that it would sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners. Using the Fed’s FRB/US model and assuming that the FOMC refrains from rate hikes until the economy is at full employment and inflation just above 2%, we estimate that the net effect of the package would be a frontloaded increase in output relative to potential of 2-3pp as well as a more backloaded boost to core PCE inflation of 0.2-0.4pp. (…)

While a blue wave would have mixed implications for broad US equity indices—after all, the Biden program does include a sizable increase in the corporate income tax rate by up to 7 percentage points—it would likely result in substantially easier US fiscal policy, a reduced risk of renewed trade escalation, and a firmer global growth outlook. These shifts should be clearly positive for cyclical sectors, as well as firms that pay most of their taxes outside the United States. In addition, we would expect a material backup in longer-term sovereign bond yields as well as support for our standing forecasts of higher commodity prices and a weaker US dollar.

But in mid-August, GS calculated that 2021 earnings would be 11.8% lower under Biden than under Trump, which included a negative GDP impact. Gotta be flexible on the sell side and go with the flow.

Potential Impact of Tax Reform on 2021 S&P 500 EPS

But who cares about earnings nowadays? It’s the economy, stupid!

Jason Furman, a professor of practice at Harvard who was chairman of the White House Council of Economic Advisers, 2013-17, reminds us that in today’s WSJ:

Biden’s Tax Plan Would Spur Economic Growth Wealth would be shared more broadly, and even free-marketeers see the benefit of more revenue.

Every four years a Democrat runs for president on a platform that includes higher taxes for the wealthy. And every four years a group of people predicts that the sky will fall if those plans are implemented. Yet every time their plans have been implemented, the sky hasn’t fallen—if anything, economic growth and business investment have been stronger under Democratic than Republican presidents.

Joe Biden’s proposals to raise taxes on households making more than $400,000 annually, and on corporations, are broadly consistent with the tax systems under the successful economies of Presidents Clinton and Obama. The Biden plan also includes a few innovations that would improve on its predecessors. It would devote revenue to an ambitious set of proposals to expand economic growth and ensure it is shared more broadly. (…)

The Biden tax plan would raise revenue to 19% of GDP by the end of his first term, in part by returning the top individual rate to 39.6% and undoing half of the 2017 corporate rate reduction. The revenue share of the economy would remain below the average during Mr. Clinton’s second term, a period of historically fast job growth. It would also be less than the 21% of GDP that the bipartisan Bowles-Simpson fiscal commission proposed in 2010. (…)

The Biden plan as a whole would boost the economy, as near-term stimulus massively outweighs the immediate tax increases in both quantity and bang-for-buck. Goldman Sachs found that the plan’s robust fiscal stimulus would add nearly 1 percentage point to the annual growth rate during a first Biden term. (…)

For good measure,

Lagarde Is Prepared to Add Stimulus, Cut Rates to Support European Recovery European Central Bank President Christine Lagarde said the bank is ready to inject fresh monetary stimulus to support the eurozone’s stuttering economic recovery from the Covid-19 pandemic, including by cutting a key interest rate further below zero.

Meanwhile,

U.S. House’s antitrust report hints at break-up of Big Tech firms: lawmaker The U.S. House of Representatives antitrust report on Big Tech firms contains a “thinly veiled call to break up” the companies, Republican Congressman Ken Buck said in a draft response seen by Reuters.

The House antitrust subcommittee is expected to publish its report this week on Amazon.com Inc, Apple Inc, Facebook Inc and Google owner Alphabet Inc.

A Buck representative confirmed to Reuters the authenticity of the draft response, which was first reported by Politico.

In the draft, Buck said he shared Democratic concerns about the power of Big Tech firms, with their penchant for “killer acquisitions” to eliminate rivals and self-preferencing in guiding customers to their other products. However, he objected to a plan to require them to delineate a clear “single line of business”. (…)

THE DAILY EDGE: 5 OCTOBER 2020

Job Gains Slow as Layoffs Persist Hiring gains slowed sharply headed into the fall as more layoffs turned permanent, adding to signs that the U.S. economy faces a long slog to fully recover from the pandemic.

Employers added 661,000 jobs in September, the Labor Department said Friday. The increase in payrolls showed the labor market continued to dig out of the hole created by the pandemic, but at a much slower pace than over the summer.

The U.S. has replaced 11.4 million of the 22 million jobs lost in March and April, at the beginning of the pandemic. Job growth, though, is cooling, and last month marked the first time since April that net hiring was below one million. (…)

The unemployment rate fell to 7.9% in September from 8.4% the prior month. Though the jobless rate is down sharply from a pandemic high of near 15% in April, last month’s drop partially reflected an increase in permanent layoffs and more people leaving the labor force. That could stem from more workers quitting their job searches due to weak employment prospects or child-care responsibilities. (…)

The recent layoff announcements aren’t reflected in the September jobs report, which includes data gathered in the first half of the month. (…)

The WSJ editorial board, clearly rooting for Trump’s re-election, displays an upbeat view in More Jobs Momentum:

The private U.S. economy added 877,000 new jobs in September, but you’d think from the coverage that this was bad news. While the pace of hiring has slowed since the summer, the economy and labor market still have plenty of growth momentum. (…) In any normal period, this report would have been hailed as outstanding. (…)

Local governments shed 231,000 workers in public education. This is no surprise as schools that are closed need fewer workers. Local governments added 96,000 non-education jobs last month so they don’t seem starved for cash. (…)

“Growth momentum”?

fredgraph - 2020-10-05T061747.711

unnamed (80)

Data: Bureau of Labor Statistics. Chart: Axios Visuals

Axios: “When the first waves of layoffs hit in March and April, most of the newly unemployed believed their job losses would be temporary, and reported they were not looking for work. Without a mass surge of hiring significantly above the levels seen in September, the “tsunami” of unemployment that economists warned Dion about in early August is poised to hit in the next couple months.”

Unlike corporations trying to preserve margins and profits during downturn, governments try to protect jobs, caring after the financials after the economic rebound. In 2008-09, local government employment rose during the first half of the crisis, stabilized during the second half and quickly declined during the following 4 years.

This time, lockdowns obliging, local government jobs cratered 1.3 million in April and May. Some 25% of these lost jobs came back in the past 3 months but it is a big stretch to claim that the worst is over. Almost Daily Grant is one of the bad news bearers:

As state and local governments are required to balance their budgets and lack Uncle Sam’s handy access to the Federal Reserve printing press, the prospect of further bloodletting across municipal payrolls appears likely. During a recent Economic Policy Institute teleconference, Moody’s Analytics chief economist Mark Zandi projected that the aggregate state and local governments budget shortfall could approach $500 billion by fiscal 2022, along with an additional 3 million lost jobs over the next 12 to 18 months.

Three million lost jobs? That would bring local government employment below 11 million, a level last seen in 1989. Even if the Defund Police movement succeeds in eliminating all 800,000 police officer jobs in the U.S., another 2M+ cuts will be needed, likely requiring wide cracks along a certain wall in order to maintain local government operations…

High frequency data from Homebase is not displaying “plenty of growth momentum” as suggested by the WSJ. New York state payrolls remain nearly 40% below their pre-pandemic levels. The state’s credit rating just got cut one notch by Moody’s with a negative outlook.

Homebase payrolls tracking suggest a plateau (% deviation in employment from January)

unnamed (11)

Permanent job losers keep rising across the USA and reached 3.8 million in September, up 345k (10.1%) from August and 2.5 million from February. Permanent job losers and the unemployment rate peaked 5 months after the end of the financial crisis but at much higher levels. After the 2001 recession, these numbers peaked almost 2 years later.

fredgraph - 2020-10-03T063814.824

Online business directory Yelp said as of Sept. 15, 60% of the closed businesses it tracks, nearly 100,000, had no plan to reopen. Those closures, largely among small businesses, particularly hit restaurants and stores. (WSJ)

This next chart shows the YoY change in employed people in goods vs service producing sectors. Goods-Producing jobs are down 1.0 million YoY in September but Service-Producing jobs are down 8.6 million, both series swooshing, right when the second wave is hitting and the CARES act effects waning.

fredgraph - 2020-10-03T072045.670

While manufacturing PMI surveys point to better days ahead, these diffusion indices mask the steep climb in actual numbers needed to reach pre-pandemic levels:

fredgraph - 2020-10-03T074242.032

At the current level of backlog, manufacturers need no more than another 100-200k workers but employers are likely to increase weekly hours before, requiring only 65k new jobs assuming backlogs don’t decline any more.

fredgraph - 2020-10-03T074651.036

The odds of a [stimulus] deal and a Democratic election sweep have increased, Evercore ISI said.

Services PMIs:

The U.S. Services PMI will be out later this morning.

Service sector weighs on eurozone economy in September

Growth of the eurozone’s private sector slowed further towards stagnation in September. The IHS Markit Eurozone PMI® Composite Output Index slipped to a three-month low of 50.4, down from August’s 51.9 and indicative of only a marginal expansion. The final reading was, however, firmer than the earlier flash estimate (50.1).

image

The composite PMI belied a two-speed economy during September. Led by a strongly performing Germany, overall regional manufacturing output rose at the fastest pace for over two-and-a-half years. In contrast, service sector activity slipped back into contraction by registering its worst performance since May.

imageThere was some notable divergences in activity at the country level during September. On the one hand, Germany recorded a marked rate of growth, with its performance far outstripping the rest of the region. Italy was the only other nation to record expansion, although the gain here was marginal.

France and Ireland meanwhile slipped back into contraction, whilst a sharp deterioration in services activity weighed heavily on Spain’s private sector performance.

Incoming new business in the eurozone increased only slightly during September, and at the slowest rate in the current three-month period of growth. That was in spite of the first rise in overall export trade for the first time in over two years.

As new business growth softened, and with evidence of ongoing spare capacity across the private sector economy, companies were again able to comfortably deal with overall workloads. According to the latest data, backlogs of work declined for a nineteenth successive month albeit again only modestly.

Employment numbers were again reduced, marking a seventh successive monthly fall in staffing levels. That said, the rate of contraction was the weakest recorded in the current sequence with all nations registering slower falls when compared to August. France and Spain recorded the sharpest cuts to employment numbers, and Italy the weakest.

Operating expenses increased for a fourth successive month during September, with the rate of inflation solid. Input price inflation was sharpest in Spain. Meanwhile, the challenging business environment, characterised by still-weak demand and strong competitive pressures, weighed on company pricing power. Subsequently a seventh successive monthly decline in output charges was recorded in September, with the fall the greatest since June.

Business expectations did, however, improve to their highest level for seven months with confidence broadly in line with its long run average. Italian companies where the most confident, with sentiment here at its highest since the start of 2016.

The IHS Markit Eurozone PMI® Services Business Activity Index signalled a fall back into contraction of the services economy during September. After accounting for seasonal factors, the index posted 48.0, down from 50.5 in the previous month and the lowest level since May.

Germany was the only services economy to register growth (albeit marginal) as all four other nations monitored registered a contraction. Spain recorded by far the steepest monthly fall, followed by Ireland.

A second successive monthly reduction in overall new business was signalled by September’s survey, with Germany again the only nation to record any growth. Export business was also down markedly, extending the current period of contraction to over two years.

A modest reduction in employment was signalled by the September survey data as there remained little pressure on capacity (backlogs of work outstanding declined for a seventh successive month). Spain registered the sharpest monthly fall in job numbers with solid reductions also seen in France, Ireland and Italy, while Germany posted a slight rise.

Cost considerations were a factor behind the latest round of job losses, although firms nonetheless recorded a fourth successive monthly rise in overall operating expenses. Output charges declined again, however, with the rate of deflation the sharpest for three months.

Finally, looking ahead to the coming 12 months, business confidence strengthened in September with sentiment highest in Italy.

Japan: Business activity decreases at slowest rate in eight months

The Japanese service sector continued to contract at the end of the third quarter, with business activity, new orders and employment all decreasing in September. However, the rates of contraction eased, signalling a move towards stabilisation. The ongoing coronavirus disease 2019 (COVID-19) pandemic led to the closure of businesses whilst lockdown restrictions prevented tourism activity. Nevertheless, sentiment was at its highest since December, with panellists hoping for the passing of COVID-19 and full resumption in operations over the next year.

The seasonally adjusted Japan Services Business Activity Index posted 46.9 in September, up from 45.0 in August. The latest figure signalled a reduction in activity, although one that was the slowest in the current eight-month sequence of contraction.

image

Incoming new business received by service providers also fell for the eighth month running during September. Although solid, the pace of decline eased from that seen in August. Anecdotal evidence continued to highlight the impact of lockdown restrictions on client operations and market demand.

Export sales remained especially subdued, with latest data signalling a steep and accelerated contraction. International travel restrictions and client business closures were often mentioned by respondents.

The reduction of new business at Japanese service companies contributed to a fall in staffing numbers, although firms commonly mentioned employee retirements as the main driving factor. Employment has now contracted for seven successive months. Despite reduced workforce numbers, companies were able to deal with incoming new orders and continued the downward trend in outstanding business seen since last December.

Average input costs fell for the second consecutive month during August. However, the rate of decrease was only marginal. Survey respondents noted lower labour costs following reduced workforce numbers. Cost savings were passed onto clients, with some firms mentioning discounting strategies to stimulate sales in the sector.

Finally, business sentiment improved at Japanese service providers and returned to positive territory during September. Despite another downturn in new work and output, firms hope for a recovery in demand in both domestic and foreign markets and the complete easing of lockdown restrictions over the coming year. That said, some firms expected a decrease in business activity amid worries about the continuation of COVID19.

The au Jibun Bank Japan Composite* PMI Output Index rose to 46.6 in September from 45.2 in August, the highest reading since February. However, the index was below the crucial 50.0 neutral value for the eighth month running.

Private sector new business also continued to fall, although the pace of reduction eased to the slowest in the current period of decline. New orders placed at Japanese manufacturers decreased to a greater extent than in the service sector.

Falling workloads led private sector companies to reduce their staffing levels. Marginal job cuts were signalled among manufacturers and service providers.

Companies in both sectors were optimistic that business activity will rise in the coming 12 months. At the composite level, business expectations were the strongest since December 2018.

September Vehicles Sales increased to 16.3 Million SAAR

The BEA estimates sales of 16.34 million SAAR in September 2020 (Seasonally Adjusted Annual Rate), up 7.6% from the August sales rate, and down 4.3% from September 2019. (…) Sales-to-date are down 18.8% in 2020 compared to the same period in 2019.

The early days of the Covid pandemic brought an unprecedented decline in driving in the U.S., with vehicle miles traveled down 41% from February to April on a seasonally adjusted basis. By July, the most recent month for which the Federal Highway Administration has released data, vehicle miles were still down 13% (seasonally adjusted) from February. (…)

A study this summer by accounting and consulting firm KPMG forecast that vehicle miles traveled will settle at about 90% of pre-2020 levels in coming years. On a per capita basis, they were down 5% from their all-time high in the mid-2000s even before the pandemic. Driving in the U.S. would seem to have peaked. (…)

In September, 22.7% of employed Americans reported working from home because of the pandemic, according to the Bureau of Labor Statistics. Among those in management and professional occupations, the figure was 40.5%.

Americans working at home were saving 60 million commuter hours a day, according to a University of Chicago study.

Electronic commerce and mail orders accounted for 14.2% of U.S. retail sales in July, according to the Census Bureau, up from 11.7% in February and 3.3% in early 2000. (…)fredgraph - 2020-10-05T063608.245

That would be a huge change following the 10% jump since 2014. Here’s tyhe long term chart for vehicle sales courtesy of CalculatedRisk:

New York City to Close Schools in Some (9) Neighborhoods Due to Rising Covid-19 Cases

image

Cineworld brings down curtain on U.S., UK theatres; 45,000 jobs hit Cineworld will close all of its UK and U.S. movie theatres this week, leaving as many as 45,000 workers unemployed for the foreseeable future as it strives to survive a coronavirus collapse in film-making and cinema-going.

The world’s second-biggest cinema chain said the reluctance of studios to push ahead with major releases such as the new James Bond film had left it no choice but to close all 536 Regal theatres in the U.S. and its 127 Cineworld and Picturehouse theatres in the UK from Oct. 8. (…)

Studios have released some of this year’s major planned blockbusters on Netflix or the Disney Plus streaming platform, while cancelling others until next year. (…)

The WSJ adds: “If the status quo continues, 69% of small and midsize movie theater companies will be forced to file for bankruptcy or to close permanently,” the National Association of Theatre Owners said.

States Overpaid Virus Unemployment Claims. They Want the Money Back. Workers in Colorado, Pennsylvania and elsewhere were overpaid accidentally. Now, people are being asked to repay thousands of dollars or are having their current pandemic benefits cut to make up the difference.
TWIN DEFICITSimage

(Variant Perception Research)

Lacy Hunt and others have long argued, and been proven correct so far, that rising debt actively suppresses economic growth. Debt service prevents everyone (government, businesses, and households) from investing enough capital to generate long-term growth. This is why each new dollar of debt is producing less additional GDP. We are borrowing to fund consumption instead of production. (John Mauldin)  image

TECHNICALS WATCH

Lowry’s Research: BP and SP side by side, going sideways. Needed: “upside reversal in the trend of BP”.

image

A 32-Year-Old Trader Is Driving 21,000 Amateur Stock Investors EToro has gained a devoted following in Europe and is now looking to the U.S.

Jay Smith isn’t a professional money manager. He’s just a 32-year-old living in southern England who spends his days playing the stock market.

But Smith, better known online as Jaynemesis, drives the investment decisions of more than 21,000 people with $40 million in assets who copy his trades on a digital platform called eToro. When he loads up on shares of FedEx, so do they, and when he shorts the Nasdaq index, they do that, too.

All of this is taking place on EToro, which calls its service copytrading. While the feature has played a key role in attracting more than 15 million users to the Israeli-British company — which is around the same level as online trading powerhouse Robinhood — the practice has yet to take root in the U.S. That might be about to change. (…)

The company’s biggest difference with rivals is this notion of copytrading. With the tap of a button, a customer can automatically duplicate the trades of dozens of other customers that eToro has designated Popular Investors. They perform like de facto money managers. (…)

EToro pays Popular Investors up to 2.5% of the assets that follow them. Smith, as the No. 1 copytrader on the site, is pocketing $1 million. With his portfolio up 62% in 2020, he’s been attracting droves of recruits. “Hi Jaynemesis, newbie copier here!” one recently posted on his social media feed on eToro’s site. “I have no real idea on stocks but it seems like you do.” (…)

In making it easier than ever to copy amateurs, sell short, and use borrowed money — eToro’s limit for stocks is 5 to 1 — the platforms are magnifying risk and fueling speculation, says Rainer Lenz, the former chairman of Finance Watch, a Brussels-based organization. (…)

“Traditional financial institutions don’t really offer a relevant experience for our generation,” said Yoni Assia, the 39-year-old co-founder and chief executive officer of eToro. “We expect everything to be in real time, to be mobile, and to be social. That’s what differentiates our platform.” (…)

“Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”