THE DAILY EDGE: 18 AUGUST 2020

• COVID-19 has become the third-worst cause of death in the US, according to the CDC. The pandemic has now surpassed accidents, injuries, lung disease, diabetes, Alzheimer’s and many other causes of deaths – even drug overdoses, which are surging again due to the outbreak. (ZeroHedge)

The chart shows that the U.S., Brazil and India are the big problem areas:

New U.S. Cases Slip to Lowest Since Late June Monday’s 35,112 new cases were the fewest since June 24, and followed a Sunday count that was the lowest since June 29

Hopefully, what happened in Asia and Europe and Canada is now happening in the USA as Americans and their “leaders” are seemingly getting more serious about it. Next 3 charts from NBF:

The hot states in the U.S.. Last 7 days vs last 28 days: 6 rising vs 14 declining:

Huge problem in Miami!

Most US voters fear reopening of schools, FT poll shows FT-Peterson survey reveals rising pessimism over pandemic and economic rebound

NY Fed Business Leaders Survey

After steadying last month, activity in the region’s service sector declined significantly, according to firms responding to the Federal Reserve Bank of New York’s August 2020 Business Leaders Survey. The survey’s headline business activity index fell fifteen points to -17.1 The business climate index was little changed at -74.1, indicating that the vast majority of firms still viewed the business climate as worse than normal. Employment levels continued to decline, though at a slower pace than in recent months, and wages edged slightly higher. Input price increases picked up, while selling prices continued to decline slightly. Capital spending fell for a fifth consecutive month.

The index for future business activity turned negative, falling ten points to -2.8, and the future business climate index fell to -20.4, indicating that firms expected conditions to be worse over the next six months. Employment levels are expected to hold steady at current levels, and small increases in wages are anticipated. Capital spending is expected to continue to decline. (…)

Respondents were also asked about their July revenues relative to a year earlier. The median business indicated a 20 percent decline, in both the service sector and manufacturing surveys, while the average declines were 30 percent and 25 percent, respectively. (…)

Finally, businesses were asked how long they could continue without becoming insolvent if current revenue levels were to persist and if there were no further support from government programs. Roughly one-third of firms in both surveys said they would eventually become insolvent if current revenue levels were to persist and there was no further government support. Of those indicating that they would become insolvent, about half said they could last at least another six months in both surveys, and the average expected time frame for this was about ten months.

U.S. Home Builder Sentiment Unexpectedly Surges to Record High in August

“However, the V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April. Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”

Lumber Update – August 2020

Another month forward in 2020 and another month of turbulent but booming sales in the lumber market. Building material supply centers have remained busy throughout the pandemic, and even though the general consensus was that sales would taper off after stay-at-home orders were lifted. It had an opposite effect as stimulus money, a growing confidence that the economy would rebound, and cancelled vacation plans propelled homeowners to continue to invest in their homes. All of the activity gave one heck of a boost to spending and put a mammoth dent on supply.

Virtually every sector of the building materials supply chain (but most especially with pressure treated and decking) suffered with outages, extended lead times, and anguish over disappointed and frustrated customers who couldn’t get material fast enough. Few anticipated such a robust and swift rebound.

The supply-end of the equation was punished by that fact as they had reeled back their inventories and commonly laid off employees in anticipation of a downturn in business. Trying to catch up proved a difficult, if not impossible, challenge because companies were forced to operate short-handed as many workers were reluctant to return from layoffs either due to Covid-19 concerns or because of childcare and family care issues.

BTW, the U.S. slapped a 20% duty on Canadian lumber…

Canada Home Sales Continue Surge, Rising 26% to Record in July

Meanwhile, commercial properties have lost 10% in value:

Green Street’s Commercial Property Price Index is a time series of unleveraged U.S. commercial property values that captures the prices at which commercial real estate transactions are currently being negotiated and contracted. Features that differentiate this index are its timeliness, its emphasis on high-quality properties, and its ability to capture changes in the aggregate value of the commercial property sector.

EARNINGS WATCH

We now have 457 reports in, an 81% beat rate and a +17.6% surprise factor. Q2 earnings are now seen down 33.6% vs -43.0% on July 1. Q3 estimates: -22.8% vs -25.0%. Q4e: -13.7% vs -13.2%.

Trailing EPS are now $143.75. 2020e: $129.37. 2021e: $165.73.

Trump Pledges Tax Credits, Tariffs to Redirect Jobs From China

President Donald Trump said he’ll punish American companies that move jobs abroad and reward firms with tax breaks for shifting work from China to the U.S., proposals aimed at hastening the decoupling of the world’s largest economies.

“We will create tax credits for companies that bring jobs from China back to America, and we’ll impose tariffs on companies that leave America to produce jobs overseas,” he said in a speech Monday in Minnesota. (…)

India, Taiwan and Japan have also offered fiscal incentives to entice companies to shift production out of China, or at least increase investment at home. (…)

Chinese scientists to carry out joint Covid-19 vaccine trials with Russians

Biden Tax Agenda Hinges on Democratic Control of Senate the Democratic presidential candidate plans to raise taxes by about $4 trillion.

(…) In the aggregate, Mr. Biden’s proposed $4 trillion tax increase would begin reversing decades of tax cuts. About three-quarters of the burden would fall on the top 1% of households. (./..)

Easier-to-adopt policies include raising the corporate tax rate from 21%, reversing the 2017 tax cuts on individual income above $400,000 and increasing estate taxes. The more a tax increase falls on corporations or the very rich, the more Democrats embrace it. Those changes could raise more than $1.5 trillion.

But some of Mr. Biden’s tax increases on specific industries could be tougher to get through Congress. Those include imposing a financial-transactions tax and repealing a provision that allows real-estate investors to avoid capital-gains taxes by quickly reinvesting proceeds of a transaction. And some lawmakers may want to wait until the recovery is on surer footing before imposing tax increases that could slow it down.

Democrats’ policy ambitions will be tempered by the party’s reliance on the upper middle class for votes and donations. That’s already evident in broad Democratic support for repealing the $10,000 cap on the state and local deduction, a move that benefits Democratic voters but disproportionately helps the top 1% of households—the same people that Democrats say should pay more. (…)

Sen. Ron Wyden of Oregon, who would likely run the tax-writing Senate Finance Committee if Democrats win, has been developing a proposal the Biden campaign hasn’t embraced yet—annual taxes on unrealized capital gains. And he doesn’t necessarily view tax increases as incompatible with economic recovery.

“You start by saying the wealthy would pay their fair share,” Mr. Wyden said in an interview. “My view is: You’re going to need revenue out of the gate.”

Double the Facts

I have been reading the WSJ for, what, 45 years. Surely a must read in economics/finance. This morning, I noticed a Journal’s caption at the bottom of my screen, giving me a bronze medal because I visited WSJ twice this week – “nice streak” it says, claiming that gives me “double the facts”.

The same day, the WSJ published and prominently highlighted a commentary by Andy Puzder, “former CEO of CKE Restaurants and author of “The Capitalist Comeback: The Trump Boom and the Left’s Plot to Stop It.””, titled Biden’s Assault on ‘Shareholder Capitalism’. The first paragraph:

Is Joe Biden a moderate or a radical? He says businesses “have a responsibility to their workers, their community, to their country”—a truism. But he has also called for “an end to the era of shareholder capitalism.” He says it’s “untrue and a farce” that a company’s primary responsibility is to generate returns for shareholders.

Here’s what Joe Biden actually said per The Hill:

“It’s time that corporate American pays their fair share of taxes,” Biden said.

“The days of Amazon paying nothing in federal income tax are over. Let’s make sure workers have power and a voice. It’s way past time to put an end to the era of shareholder capitalism – the idea that the only responsibility a corporation has is to its shareholders. That’s simply not true and it’s an absolute farce. They have a responsibility to their workers, to their country. That isn’t a new or radical notion.”

I am not getting into a left/right debate here. Only pointing out the “Double the Facts” farce. Biden actually said that that it is not true “that the only responsibility a corporation has is to its shareholders”, a rather subtle distinction from Puzder’s apparent quote “He says it’s “untrue and a farce” that a company’s primary responsibility is to generate returns for shareholders.”.

As Daniel Patrick Moynihan once said, “Everyone is entitled to his own opinion, but not his own facts.”