This morning, news broke that 6.6 million people have filed for unemployment over the past two weeks:
The “Back To Work Now!” crowd sees this as vindication for the dire warnings they’ve been issuing the past couple weeks, and understandably so. This is by far the biggest unemployment spike in the past 50 years, and probably on par with the economic calamity experienced during the Great Depression.
Now, it’s important to note that we don’t know how many of those unemployment claims are for people who are temporarily out of work, and how many are for people who have actually lost their job. I filed for unemployment because my employer told me to, but I haven’t lost my job.
This is still an important caveat in this data. So until we actually know how many people truly lost their jobs vs. how many people have been furloughed with eligibility for unemployment, we don’t know just how bad this situation is.
For what it’s worth, the stock market has largely shrugged off the news:
But then again, perhaps the market had already assumed this would happen long ago and priced it in when the S&P 500 declined by 35% between Feb. 20 and March 20.
What we do know, though, is that the “Back to Work!” crowd is taking this as validation, and they’re blaming Trump and his task force for all the job losses and small business closures sure to happen over the next month of CDC-advised social distancing:
One thing to keep in mind is that we don’t know how much economic activity would have slowed down even without the social distancing measures and government-mandated closures of “non-essential” businesses–i.e. naturally, out of widespread public fear of the virus. Before my work was shut down, we were already experiencing a significant slowdown in business simply due to people voluntarily self-quarantining. So let’s not act like the slowdown in economic activity is 100% due to government action–a lot of it would’ve happened anyway.
Now, is it true that we could be doing things differently in a way that would cause less economic harm and still “flatten the curve?” Sure. In my last piece I said I agreed with the idea of only quarantining the most vulnerable subsets of the population–i.e. the elderly and those with preexisting medical conditions. If we did that, and also urged everyone to simply wear a mask and gloves out in public, we would probably be okay.
But the problem is that most people in America aren’t going to wear masks and gloves out in public. It’s just not in our culture the way it is in Asia. I don’t think you can tell Americans life can go back to normal as long as they promise to wear masks and gloves whenever they leave the house. Americans just won’t do it. What are you going to do, ticket everyone seen outside the house without a mask and gloves? Jail them? It would never work.
So for now, “social distancing” and “shelter in-place” remain the most practical policies for slowing the spread of the virus. They’re not ideal by any stretch; I only said they are the most practical.
And no matter what the “Back to Work!” crowd says, it’s not as simple as “just ignore the virus and go back to work.” As bad as things may seem at the moment (25k new cases of the virus per day), things would probably be much worse had we not enacted social distancing measures.
The hard thing to grasp about prevention is that there is no way for us to see what would have happened had we chosen another course of action. We cannot simply peer into an alternate universe and see what would have happened had we taken a different course of action.
This is how life works in general. We make decisions based on incomplete information and amidst uncertainty. We can’t see into the future. Most of the time, we just have to go off instinct and best judgement. Our leaders often use “sophisticated models” to try to convince themselves they know precisely what would have happened had they chosen Path B over Path A. But as we know, models are faulty and often wildly inaccurate; anyone remember Al Gore’s “models” predicting mass calamity by 2015 due to Global Warming?
Prevention is a messy business. It really is impossible to know with certainty how many lives you saved by choosing Course A instead of Course B, because Course B never played out. And then when Course A does play out and there are still some negative consequences, people inevitably take those as the worst case scenario having played out anyway. They only focus on the bad things that did happen because of your decision, instead of comparing them to the even worse things that would have happened had you made a different decision.
What if 9-11 had somehow been foiled or stopped, whether by passengers on the World Trade Center flights retaking the cockpit Flight 93-style, or by the FBI intercepting the hijackers before they got on to the planes? Very few people would actually be aware today how big of a difference those actions made. It would have been a minor news story even at the time, and probably quickly forgotten.
In fact, the Flight 93 situation itself is a perfect example of this: the official story is that the terrorists were intending to fly that plane into the Capitol Building, but instead the passengers stormed the cockpit and wrestled control of the plane away from the terrorists, and flew the plane into the ground, making the ultimate sacrifice to prevent it from being flown into the Capitol. But Flight 93 is an afterthought when people think about 9-11. Most people just think about the image of the planes flying into the World Trade Center. We don’t have an image of a destroyed Capitol Building burned into our minds.
But Flight 93 wouldn’t be an afterthought if it had actually been flown into the Capitol Building as intended.
Similarly, it is impossible to tell how many lives have been saved and will be saved by social distancing and “flatten the curve” measures. We have know way of knowing for sure how many people would’ve died had we chosen to deal with this differently. It’s impossible for us to understand how fortunate we were because we don’t know what we avoided.
We would only know the worst case scenario for this virus if we simply did nothing and allowed it the worst case scenario to actually play out. Then we could look back with the benefit of hindsight and say, “If we had implemented social distancing measures and quarantines, then x fewer people would’ve died.”
I still think Trump made the right call in trying to flatten the curve. The worst thing for a President during a crisis is to be perceived as not doing anything. It makes it seem like you’re not in control.
Trump was put in a horrible situation with the media hyping this virus up as the End Of All Things. Had he done nothing and said, “It’s no big deal, just go about your business as usual,” then no matter how many people would have died, he would have taken the blame. Not taking any action at all leaves you open to easy criticism: “Trump did nothing and 100,000 people died! They would still be alive today had Trump taken action!!”
Trump was forced to choose between maintaining the economy and stopping the virus, and he chose to stop the virus. He can always hang his hat on the fact that he did everything he could to save lives, and that it would have been much worse had he not taken the actions he did.
And I think most Americans will more or less support him on that–poll numbers show the public gives him high marks for his handling of this situation.
But still: once the virus peaks and tapers off, and we go back to normal life, we’ll be left with the economic fallout of “social distancing,” and there will be a lot of angry, unemployed people on the other side.
Will the same Americans who currently approve of Trump’s handling of the coronavirus turn on him when they survey the economic damage “social distancing” inflicted? It’s possible, although that will depend a lot on whether they themselves lost their jobs.
But the thing is, we shouldn’t even be viewing it in these terms.
It’s not Trump’s fault people died. It’s not Trump’s fault people are losing their jobs.
It’s China’s fault.
Trump is doing the best he can to deal with a problem created by China.
China is why millions of people filed for unemployment. China is why 200,000+ people are sick. China is why over 5,000 Americans have died.
Everything bad that happens as a result of this virus is China’s fault.
China created this virus in a lab and it either got out, or it was unleashed.
Certainly the globalist free traders who have run America and Europe for the past several decades deserve a lot of the blame for putting us in a position where a virus in China becomes our problem.
But it’s still ultimately China’s fault.
China did this to us, and they should have to pay for it.
For all the people who lost their jobs, for all the businesses that have and will have to close down. For all the pensions and 401Ks that have been crushed. For all the medical bills and funeral costs.
When this is all over, China must be forced to pay reparations to the rest of the world like Germany had to do after World War I.
There must be consequences.
China cannot be allowed to get away with this.
They did this to the world.
If Western world leaders do not come together when this is over and levy punishing, crippling economic fines on China, then it’s over for the West.
If China is allowed to get away with this, then this is their world and we’re just bystanders. They will be the superpower of the world that can do anything and get away with it, no matter how much it harms everyone else.
Do we really want to live in a world where China sits at the top of the heap of world nations?
When this is all over, China must pay the price.
It will be trillions of dollars, and China must pay all of it.
The biggest outrage of this entire coronavirus crisis is that China did this to all of us.
If there is any sort of accountability at all in this world, China must pay a steep price for what is has done to the rest of the world.
As the coronavirus-induced economic shutdown continues, a divide has emerged in Americans’ opinions over What To Do About It. Not so long ago, it used to be that most people agreed that pretty much everything should be shut down and that people should stay home until this blows over. The Trump Administration publicly declared on March 15 that the country would begin “15 Days to Slow the Spread” with the hope that two weeks of social distancing and closure of “non-essential businesses” would reduce the spread of the virus significantly. After the 15-day period, then we could see where things are and potentially allow things to go back to normal. Most Americans were on-board with this plan.
But as time has passed since March 15, two developments have caused a divergence in public opinion into two camps:
“Testing in the US has ramped up significantly, revealing thousands of new coronavirus cases every day. Therefore, the 15-day economic shutdown period will not be long enough, and the country should be shut down for even longer. If we do not double down on our efforts to suppress the virus, then countless more people will die.”
“The collapsing stock market (which has rebounded some over the past few days), spiking unemployment claims, and testimonies from small business owners hurting from the shutdown, show that we need to Get Back To Work ASAP and re-open the economy before this turns into Great Depression 2.0.”
And so now, many Americans are split into the two camps: one that thinks that if we don’t keep it all shut down indefinitely then 1-2% of the US population will die, and another that thinks if we don’t all go back to work ASAP we’ll have 50% unemployment and be lined up around the corner for the soup kitchen by April.
The two camps are increasingly intolerant of one another. The Quarantine Indefinitely crowd thinks the Back To Work crowd wants to sacrifice grandma so the stock market can go back up, while the Back To Work crowd thinks the Quarantine Indefinitely crowd are hysterical idiots.
I’ve got problems with both sides–especially how they act like the other side’s fears are completely unfounded and irrational–but I want to focus on the side panicking about the virus.
Re-opening the economy does not mean “sacrificing lives for the stock market.” This is nonsensical and disingenuous.
The virus is not going to kill a significant percentage of the population no matter what we do. As it stands now, the virus has a death rate of 1.4% in the US. But that death rate is only derived from the denominator of confirmed cases. Loads more people have it or had it and recovered already, and they’re not counted in the official figure of ~66,000 cases. So the death rate is definitely even lower than 1.4%.
You can’t claim that if half the country catches the virus, then 1.4% of those who catch it will die, resulting in the deaths of millions of Americans. The death rate only factors in those who have already been tested. And not only that, if you go to the tracking website, at the bottom it will give you descriptions of the people who have died from the virus. Overwhelmingly the descriptions are like this:
“March 21 (GMT) — New deaths include:
1st death in Minnesota: a Ramsey County resident in their 80s [source]
1 new death in Oregon, first in Marion County[source]
1st death in Tennessee: a 73-year old man with underlyinghealth conditions in Nashville [source]
1st death in Arizona: a Maricopa County man in his 50s with underlying health conditions [source]
1 death in Ohio: an 85-year-old man was an Erie County [source]
2 new deaths in South Carolina: elderly people suffering from underlying health conditions [source]
1 death in California: the first death in Contra Costa County: a patient in their 70s [source]
1 death in Maryland: a Baltimore County resident in his 60s who suffered from underlying medical conditions [source] D.C. schools will be closed until April 27
1 death in Missouri: a woman in her 60s, who suffered from multiple health problems prior to being diagnosed with COVID-19 [source]”
Because we’re now over 100 deaths per day, the site doesn’t provide a blurb for every death anymore. But you can go back a few days when deaths were much lower and get some background information for most of the deaths. Older people with underlying health conditions are the ones dying. This is not to minimize their deaths at all, it’s only to point out that the death rate is not the same for everyone.
The death rate is also going down over time. On March 4, there were 138 people confirmed infected with 11 deaths. That’s a death rate of 8%. On March 13, with 2,126 people infected, there were 48 deaths, or 2.2%. And now, March 25, the death rate is 1.4%. It keeps going down the more testing we do.
“If the number of actual infections is much larger than the number of cases—orders of magnitude larger—then the true fatality rate is much lower as well. That’s not only plausible but likely based on what we know so far,” the professors argued.
The professors cited data from Iceland, China, the United States, and Italy, which is arguably the hardest-hit region when it comes to the coronavirus.
“On March 6, all 3,300 people of Vò [Italy] were tested, and 90 were positive, a prevalence of 2.7%,” the professors said. “Applying that prevalence to the whole province (population 955,000), which had 198 reported cases, suggests there were actually 26,000 infections at that time. That’s more than 130-fold the number of actual reported cases. Since Italy’s case fatality rate of 8% is estimated using the confirmed cases, the real fatality rate could in fact be closer to 0.06%.”
The professors argued that current epidemiological models aren’t adequate for two key reasons.
“First, the test used to identify cases doesn’t catch people who were infected and recovered. Second, testing rates were woefully low for a long time and typically reserved for the severely ill. Together, these facts imply that the confirmed cases are likely orders of magnitude less than the true number of infections,” it reads.”
They also said this:
“Ultimately, while stressing the seriousness of the virus that has infected almost half a million people, the professors aren’t convinced a universal quarantine is the most logical course of action.
“A universal quarantine may not be worth the costs it imposes on the economy, community and individual mental and physical health,” the article concluded. “We should undertake immediate steps to evaluate the empirical basis of the current lockdowns.”
One might object thusly: “Okay, even if the death rate is actually much lower than current figures show, ending the quarantine and allowing people to go about their business as usual means lots of people are going to get it who wouldn’t have gotten it had they stayed in self-quarantine.”
But that’s what we’re having the debate over. Is it really worth it to keep the economy running on half (or fewer) cylinders over a disease that may have a death rate as low as 0.06%? Someone should be able to answer “no” and not be considered evil.
What if people want to take the risk and go back to work and start spending money like normal? I’m sure a lot of small business owners who are hurting due to the quarantine measures would gladly take that risk. Given the number of people who catch the flu every year–CDC says at least 38 million Americans caught it this season–it’s just as risky to go out in public and go to work during flu season as it is now.
It’s not as if right now is the only time that going to work and going out in public put Americans at risk of getting sick. At any point from November to March you have a pretty high risk of catching the normal flu by going out in public and going to work, but most people don’t care–they don’t even think about catching the flu. Now is not the only time it has ever been dangerous to leave your house.
But the Keep Everyone Quarantined! crowd doesn’t want to hear it.
What is behind their extreme precaution and fear? Many, I would guess, see America’s cases of coronavirus (and deaths) increasing exponentially and quickly conclude that we do not have this thing under control, so it is idiotic and borderline-wicked to reopen the economy.
If you look at the data, they’ve got a point:
We’re over 66,000 total cases as of right now after adding about 10,800 today. Yesterday was a little over 11,000 new cases.
In terms of deaths, yesterday was our worst day yet: 225 deaths nationwide.
Today, we’ve had about 151 deaths today as of 7:15pm EST. No telling yet if this the start of a reversal, or if it’s just a blip. Still, things are clearly much worse now than they were even a few days ago.
Italy, however, is starting to see a light at the end of the tunnel. It appears daily new cases are leveling off:
Today, Italy had about 5,200 new cases.
Deaths in Italy appear to be leveling-off as well:
Today’s tally for Italy was 683.
So the situation in Italy is by no means better yet, but it at least seems that things aren’t getting worse. It might be too early to say, but it appears the virus has plateaued in Italy.
This does not mean the same applies to the U.S. We began our 15-day period of self-quarantining on the 15th, so we’re only on Day 10. If Americans are doing their part (and that’s a big assumption given that our quarantine was a recommendation rather than a government order, like Italy’s was) then we shouldn’t expect to see things turn around for another several days.
If daily new cases and deaths do begin to slow in the next few days here in the US, then hopefully we’ll be able to avoid the “Everyone Dies/Great Depression 2.0” debate. You would think it’s a no-brainer to err on the side of caution and keep the country locked-down for longer, given that if things really get out of control and we do suffer massive amounts of deaths, we’ll have an economic depression anyway. So why not just play it safe and keep everything shut down for even longer?
Well, the Back To Work crowd would argue that it’s a false choice to say we have to choose between a hundred thousand people dying (or more) and another Great Depression. And they’re right: I don’t think there’s any scenario where tens of thousands of Americans die from the coronavirus.
Trump seems to have made up his mind already. Last night, he tweeted:
“The cure cannot be worse than the problem.” This is essentially what the Back To Work crowd is arguing; we can’t wreck our economy for a virus that has only infected 66,000 people in a nation of 330 million. The Back To Work crowd also points out that the Swine Flu epidemic of 2009 was worse than this, with over 115,000 confirmed cases in the US and over 3,400 deaths, and we did not freak out anywhere near as much as we are now. We never considered shutting our economy down for that.
Trump tweeted this today:
He’s completely correct. I don’t doubt for one second that a major reason most “news” channels and bluecheck “reporters” are pushing non-stop fear porn over the virus is because they think it’ll hurt Trump. Does the media want an economic collapse? Absolutely. They think it will turn the country against Trump.
Trump has figured out the game. While the vast majority of the Keep It Shut Down! crowd feel that way because they’re genuinely afraid of the virus, the media, which is chiefly responsible for making all these people so scared is completely exploiting this situation. And since Trump is aware of what they’re trying to do, he’s pushing for things to go back to normal soon.
In Trump’s most recent press briefing tonight, he said “There are large sections of our country, probably, that can go back to work sooner than others. We’re looking at that. People are asking ‘Is that an alternative?’ and I say absolutely, that is an alternative.”
Trump is targeting Easter (April 12) as hopefully the day everything can go back to normal, and that would mean almost a full month of social distancing. That seems like enough, but the Back To Work crowd says it’s too long, while the Quarantine Indefinitely crowd thinks it’s insanity.
But I don’t see why we can’t, after the 15-day period, lift the quarantine for parts of the country that haven’t been hit as hard as others. After all, more than half of the nation’s cases right now are in the immediate New York City area:
We definitely should not lift the restrictions on NYC anytime soon. But for the rest of the country, as long as we take the necessary precautions and avoid New Yorkers, it should be fine.
NY Governor Andrew Cuomo says the peak is still 2-3 weeks away for New York, but that shouldn’t mean the whole country has to remain shut down. Quarantine New York. Don’t go there unless you absolutely have to, and when you return, self-quarantine for 14 days. Don’t leave New York unless you absolutely have to, and if you do, you self-quarantine for 14 days.
We can and should keep the current restrictions in place for the most at-risk subsets of the population, namely the elderly and those with preexisting health conditions. Keep the elderly–nursing homes especially–cordoned-off while the rest of us go about our business as usual. This seems like the path Trump is leaning towards, and to me it makes perfect sense. It’s a smarter, more efficient selective quarantine policy rather than a blanket nationwide quarantine.
But the Quarantine Indefinitely crowd is still very upset by this. Most of them, I’d guess, are motivated primarily by fear.
Specifically, there’s a widespread belief that This Virus Is Just Different, uniquely bad, and that if you catch it, it will permanently damage your health. Is this true? It could be true. It’s not really known for certain yet because it hasn’t been around for very long. But stories about how the virus left male survivors sterile turned out to be false. As far as permanent lung damage, that could well be true. But it varies from person to person. Probably most people who get it will recover and be just fine for the rest of their lives.
The regular flu and the common cold can even can have lasting effects on your body, from hearing loss to Guilliane-Barre Syndrome and even lasting lung damage. The Wuhan Virus is not the only widespread virus that can potentially inflict permanent damage on your body. Yet all the scary stories in the media have people convinced they should be downright terrified of getting the coronavirus.
But others in the Shut It Down! camp–I’d say a minority, but definitely a sizable number of individuals, and predominant on social media–are motivated by something else. It’s not really fear of the virus and mass deaths, either.
Some people just want to watch the world burn. Most of them are younger people, and this, right here, is the closest they’ve ever been to Chaos.
Maybe they’ve grown up on too many post-apocalyptic movies and video games, but they feel like life would be more fun if society collapsed. I’m not sure the reason, but there are a lot of people out there who want society to collapse. To them, the near-total shutdown of the economy is “cool” because it’s such a break from the ordinary. And some feel that if it continues for longer, then society itself will totally collapse, and after that, a new type of society will arise from the old one’s ashes. And it will be Better, they imagine.
I know this because I have a little bit in me, although not nearly as much as when I was younger. Really, it’s more of a yearning for adventure that cannot be satisfied in our world of urban/suburban orderliness and 9-5 jobs. So, some people think, maybe if everything collapsed and we went back to the Stone Age, life would be full of adventure. And maybe, if there is a “great reset” of human civilization, I could end up on top.
This Societal Collapse Fantasy largely disappears once you’re invested in the stock market, but there are still lots of people who want to see the world burn.
Whether it’s young would-be socialist or anarchist computer-chair revolutionaries, or simply people who hate the modern world and wish for things to be completely different, there are a lot of people that are secretly (maybe even unconsciously) hoping the coronavirus basically brings the modern world to its knees. (And I’m not saying these are bad people for hating modern society! I’m no fan of modern life myself. But I don’t think society needs to collapse in order for me to get the kind of life I want out of it.
That said, I still think the broad majority of the “THE VIRUS IS GOING TO KILL US ALL!” crowd are motivated by fear of the virus rather than a desire to bring down the modern world.
Fear is a very powerful emotion. Some would say it’s the most powerful. Most people who are gripped by fear cannot be reasoned with (although some can). The only thing that will snap them out of the fear currently governing their words and actions is if real-world events prove their fears to be overblown and unfounded. And even then, they will credit their own over-cautiousness for the fact that the world didn’t end.
The people gripped by media-induced fear–while most of them certainly have noble intentions and valid reasons for being fearful–can’t be allowed to call the shots here. We just have to move forward and get the economy firing on all cylinders again. Eventually the people who want to stay quarantined until August will get over it.
All that said, when we do re-open the economy, we should still emphasize washing our hands and social distancing and generally try to keep our hands in our pockets as much as possible. We should wear masks and gloves whenever possible and not look at people who do wear masks like they’re crazy. We should avoid large crowds of people and mass gatherings for at least another month.
But we should re-open the economy ASAP. Small businesses can’t hold out much longer.
The government has told many of them to shut down, and so businesses–small and large–need a way to recoup lost revenues. You can’t just tell businesses to shutter and then not expect to compensate them for lost revenues. That’s pure evil. Bailouts or bust. Wall Street nearly killed the global economy back in 2008 and they got bailed out. You could even argue that the big banks that survived ’08 were rewarded for their recklessness.
Those were bad bailouts because the banks didn’t deserve them.
This time around, however, the bailouts are infinitely more justifiable. Most of these businesses are not in trouble because they were reckless and immoral, but because they were simply doing what the government told them to do. There is nothing wrong with a bailout here.
Not every case is the same, of course. For instance, the airline companies that nickel-and-dime the hell out of us (carry-on fee, booking fee, checked-bag fee, seat selection fee) and spent 96% of their free cash flow over the past decade on stock buybacks, now they want a bailout because they have no money?
That’s the kind of stuff that should piss Americans off. But still: what else are we supposed to do? Let the airlines go belly-up? It might Feel Good for a little while to see those greedy bastards get what’s coming to them, but it would be terrible for our country in the long (and short) run. (Thankfully, it appears the stimulus bill will prohibit stock buybacks for any company that gets government money. I still think the weasels will find a way to weasel around this, but it’s at least encouraging that this language has been included in the bill.)
If, by keeping the economy shut down well into April and we force businesses to fold–both mom and pop stores and the larger publicly traded companies–then it will only accelerate the consolidation of our economy, in other words, monopolization. The big trend of the past 20 or so years has been consolidation: the big firms get bigger by buying up the smaller firms. The market share of the various sectors of the economy held by the largest corporations has only increased over the past couple of decades, and if we let businesses fail now, that will only get worse.
This is what happened in 2008-2009 and it’s what’s going to happen today if we let small businesses fold.
What I’m trying to say is that there’s a lot of validity in what the Back To Work crowd is saying. It will be very bad for our country if lots of businesses have to close, and not just because of all the people who will lose their jobs. The big corporations that can weather this storm just fine will emerge with more power and market control.
Which is why I wonder if this has been the plan all along: a mass economic genocide of small businesses so that big businesses can swoop in and buy all their assets up for cheap. The conspiracy theorist in me fears that this has been the plan all along, and until I see very generous terms from the government on the small business bailout that make it clear the government wants small businesses to come back, I don’t know if I’m going to be able to disabuse myself of that suspicion.
I saw something about the government promising small businesses “low interest loans” and that phrase set off my Conspiracy Alarm. The government is going to force small businesses to shut down and then act like it’s doing the small businesses a favor by offering them “low interest loans” to deal with problems they encounteredfor doing what the government told them?
I certainly hope this is not what happens when all’s said and done. But it might. I guess low-interest loans are better than nothing.
That said, I do think some of the Back To Work crowd’s concerns are overblown.
This chart of the ridiculous spike in unemployment claims is misleading:
I filed for unemployment, but I wasn’t fired. Not all of these people have lost their job. Many of them have actually just been temporarily furloughed.
As for the US economy not being able to handle a two-week pause: European countries shut down for a whole month every year. Scott Adams provoked a good discussion the matter today:
But if the American economy shuts down for a week then everyone goes bankrupt and businesses can’t keep their doors open? What happened to rainy day funds?
Yes, that’s because 300 years ago we were all farmers and our economy did not rely on complex international supply chains and financial leveraging products. People didn’t rely on much other than themselves. They knew how to budget–and I’m not just talking about money, I mean crops and food. They had to stretch the harvest through the winter months or else they died.
The replies to Adams’ tweet from Europeans were interesting:
This Businessweek article from 1993 provides a small glimpse into how life is in Italy during August:
“It’s just no fun being a journalist in Europe during the summer. I had wanted to write about the spiffy new Punto subcompact that Italian auto giant Fiat will be rolling out next month, but nobody answers the phone at company headquarters in Turin. Then I thought, surely BUSINESS WEEK readers will want to know about how the Sicilian Mafia finally seems to be on the run? Alas, every prosecutor I try to call in Palermo is at the beach. Hey, I’ve got it! I’ll do a Letter From Rome–and describe how no one over here works in August. “Now that’s not a bad idea,” says Antonella, my Italian wife, who has been on holiday since July. “And while you’re at it, fetch me another Diet Coke.”
“It’s August again and in Europe that means “out of the office” messages, “closed” signs, and desolated streets. August 1st marks the unofficial start of summer vacation in Spain, France and Italy, and even in times of economic crisis, most employees are dead-set on taking their summer days.
And why not? According to a report by the Center for Economic and Policy Research, European countries lead the world in guaranteeing paid leave for its workers. Among OECD countries, 16 of the 18 most generous governments when it comes to paid vacation are European.
Spain and Germany are among the most holiday-happy, both offering 34 days of paid leave each year. Italy and France guarantee 31 days of paid vacation, and Belgium requires 30. These numbers include both mandatory vacation and public holidays.
CEPR reports that the United States is the only nation among advanced economies that does not provide a legal guarantee of paid leave. New Zealand and Australia ensure respectively 30 and 28 days of paid leave, and Canada’s federal government stipulates 19 paid days, with some provinces adding on additional time. Even in Japan, where thousands commit suicide every year because of work-related stress, all employees are guaranteed 10 paid vacation days.
To be clear, many American companies do provide paid leave. According to CEPR, 77 percent of private sector companies offer employees at least some paid vacation, and those workers get an average of 21 paid days.
Still, that leaves nearly 1 in 4 Americans without any guarantee of paid time off from work. Those workers are noticeably overrepresented in the lower classes, notes CEPR. Half of the workers whose wages scale in the bottom 25 percent enjoy no paid leave.”
It seems like a matter of respecting basic human dignity to simply not expect employees to devote their entire lives to increasing The Company’s Profits. Maybe Americans who are off work right now will realize how nice it is to have a European-style vacation, and perhaps there will be a new push for some form of government-mandated paid vacation time for the most over-worked nation on earth.
To be sure, even though European countries have very generous state-mandated paid holiday requirements, it’s not as if it all happens at once. Lots of Americans have this belief that basically the entire continent of Europe shuts down for the month of August, but that’s not entirely accurate. Lots of Europeans do take their vacations in August, but not everyone. There’s a big difference between “much of the economy” and “the whole economy.”
But then again, it’s not as if the whole American economy is currently shut down. I’ve been out and about a few times over the past 10 days and plenty of businesses are open. I guess we’ll see when the Q1 GDP print is release just how much of the U.S. economy was shut down, but I don’t think it’ll be as bad as the alarmists are saying.
The whole point of the European example is that European businesses plan ahead for August, and the fact that all their employees get a full month of paid vacation. I’ve never heard any stories about how Europe descends into chaos and economic depression every August. They get by just fine.
In a globalized world of free trade, free travel and largely open borders (at least in the West, i.e. the countries everyone else wants to move to), we’re going to have to get used to events like this. A viral outbreak in one country will quickly spread and overwhelm the whole world. Maybe it’s time we structure our economy to be more prepared for stuff like this. It’s all part of the game our elites have chosen to play.
Now, all that being said, the one thing both the Back to Work and the Stay Quarantined crowds ought to be able to agree on is that
Nancy Pelosi and the Democrats she leads are not taking this seriously. They’re totally exploiting this crisis to load up the stimulus bill with pork and leftwing wishlist items that are not even remotely pertinent to the matter at hand.
By no means am I saying every last thing the Republicans put into the stimulus bill is pertinent and awesome. I am under no illusions that this is the case. There’s probably tons of corporate welfare and other bullshit handouts put into the bill by Republicans.
But Pelosi is on another level:
She’s trying to squeeze “Green New Deal” agenda items into the coronavirus bill, as if limiting airplane emissions has anything to do with re-starting the economy.
Not only that, she’s pushing for mass amnesty:
Amnesty for DACA illegal aliens? Unbelievable. She’s saying, “If you want to provide relief to small businesses, you have to legalize 800,000 illegals, too.” Can you make it a little less obvious you want to destroy America, Nancy?
I understand that Nancy has to do this kind of shit to appease the Sanders-wing of her party. She’s upholding her end of the deal, as required by Ocasio-Cortez and the rest to allow her to be Speaker: intransigently push for the most radical and idiotic Social Justice™ and Climate Change Cult agenda items at every opportunity.
But still, it makes me wonder: if Nancy and the Very Opinionated Young Women Of Color Whose Voices Will Be Heard she serves aren’t taking this coronavirus situation seriously, then why should I?
As I wrote earlier, I think this economic shutdown was probably part of the plan–whether China’s as part of the trade war, or the elite’s. I still don’t know who exactly was behind this but the goal was to tank the economy and make people give up their freedoms out of fear.
I’m ready to go back to normal. I like normal. It takes abnormal for us to realize how much we like normal.
But I can’t help but think that’s what the special interests and lobbyists want us to feel. They want us to be so afraid of losing our jobs and the economy tanking that we’ll acquiesce to whatever they want in the stimulus bill and just get back to normal. And the rest of us, they want so terrified of the virus that we
You’re probably aware the stock market has been tanking lately. This has lots of people wondering whether we’re about to enter a protracted bear market, defined as a drop of 20% of more from record highs. While no one can possibly know what the future holds, it is worth discussing the matter given that as of today the S&P 500 sits more than 12% beneath the record high it hit earlier this year.
Here is the context of the recent sell-off:
Without getting too much into the chart, we can see that the market hit an all-time high in early October and then had a sharp sell-off. It rebounded slightly by mid-October, then fell to new lows by the end of the month. It attempted to rally in early November, but was unable to retake previous highs, and tumbled down to 265. Late November saw a minor rally to about the same point as the early-November rally, and then a drop-off in early December. The market sort of hesitated for a bit, then sold off again giving us the current drop we’re in now.
The main things chart analysts look for are new highs and new lows. A good sign is the market continually making new highs, a bad sign is the market making new lows. This should be pretty obvious stuff.
Another important thing is that the chart shows us not just stock prices but investor moods. The chart represents investor sentiment. New highs mean investors are willing to pay more today than they were yesterday. New lows mean investors won’t pay as much today as they were willing to yesterday. This means something changed.
We can see that after the early-October correction, the market tried three times to rally back to its highs, but all three times it failed to break out above the 280 level. That’s what technical analysts call “resistance”. Chart watchers look for “floors” and “ceilings”, also known as “support” and “resistance.” The blue line at the bottom of the chart showed the market’s previous “support” level at around 265, and we can see that it has dropped beneath the support, which generally means further pain ahead. If the market had bounced off of the 265 support level (again, the blue line), that would have been a good sign. But since it fell below the support line, it’s likely there’s further downside. It’s not guaranteed, of course, because anything can happen.
The bottom line is that lower lows and lower highs equal bad things. Higher highs and higher lows equal good things. What we’re seeing now is lower highs and lower lows: the current sell-off has reached lower lows than the October sell-off.
If we zoom out to take a bigger-picture view, we can see that the market is sitting on a fairly long-term support level not seen since April of this year, and prior to that, February. The 252-256 level seems to be a critical support (blue line again), and if we see the market drop below 252, it probably means even more pain.
So we’ll have to wait and see. As far as buying and selling recommendations go, I don’t want to get into that because I don’t want to be responsible for anyone else’s personal finances, but for what it’s worth I’m considering selling given that my portfolio is barely down right now. That’s just me, though. I’m not telling you to sell, I’m not telling you to buy. That’s just what’s going on in my head. Also keep in mind our brains are not wired to succeed in the stock market: we are wired to be risk-averse, and so our natural instinct is to want to sell when the market is going down and there’s red everywhere, in order to avoid further loss of principal. Yet that’s often the best time to buy.
Obviously the long-term approach to the market is to buy low and sell high, and times like this underscore how hard that truly is in practice: so many people thought it would be a good time to buy in October when the market was at record highs, because things seemed to be going well. But now, when people can buy the same stocks at lower prices, they want nothing to do with the market because things seem bad.
If you think about it, a stock you liked at $100 should be far more attractive after it has fallen to $75, no? But that’s not how our minds naturally work. Our minds believe that a stock that has fallen from $100 to $75 will keep falling (eventually to zero), even though it’s more likely that the stock has probably been oversold and is due for a rally (barring any extreme situations like Lehman Brothers in 2008 or Enron, where a company has gone belly-up, in which case it most certainly will go from $100 to $75 and eventually to zero). We also believe that a stock that has risen from $75 to $100 will keep rising, even though the most likely scenario is that the gains have already been had and the stock is more likely to go down than up.
Here are the main points for the stock market:
All bull markets come to an end.
This one has been running since March 2009, meaning it is the longest in US history.
The previous longest bull market in US history lasted nearly 10 years, from October 1990 to January 2000. However, the 1990 bear market was arguably not a “real” bear market in that the market only fell around 20% over a span of just four months. Prior to that, the market was on a long run that began in 1983, and was only punctuated by the infamous Black Monday of 1987 when the market dropped 22% in one day and -36% in total over a particularly brutal four months. But even after that, the market was back in an up-trend just a few short months afterward. I consider the period from 1983-2000 to be one long bull run given that the two technical “bear markets” within it only lasted a few months, and were not the typical multi-year down periods we generally classify as “bear markets.”
Meaning, this could be the end, but then again the market could continue to run upward for years to come, even if we experience some short-term pain, perhaps even very severe short-term pain. But, so long as there is no deterioration in the underlying economic data (meaning GDP growth, unemployment, etc.), the threat of a long bear market is minimal despite the threat of a very sharp short-term drop.
The bottom line is that true bear markets (again, extended periods of negative returns) happen when the economy goes into recession. The early 2000s bear market (2000-2003) coincided with the 2001 recession, although the bear market was more severe (-50% in the S&P 500) than the recession, which was very mild. The late 2000s bear market coincided with the Financial Crisis/Great Recession (late 2007-mid 2009) and saw the S&P drop nearly 60%.
History shows that there’s no reason to worry about a major bear market unless the economy itself is going into recession. On that front, the economy grew 3.5% in the third quarter, which is certainly nowhere close to a recession. But, then again, the fourth quarter numbers could show economic contraction. For what it’s worth, the Atlanta Fed, which forecasts GDP, says the fourth quarter number should be 2.8% growth. While the Atlanta Fed forecasts are not always correct and are not to be treated as the Word of God, they’re generally pretty accurate.
Again, no one knows what will happen next. The market could bounce off of support at around 252-253 and this correction could be over soon. Or perhaps the market breaks below the support level and goes down even more, potentially even a lot more. But, barring a recession, I don’t see a major bear market coming soon. So keep an eye on the economic data.
That said, we are definitely due for a bear market and a recession sooner or later. All bull markets come to an end, and all economic expansions come to an end. Bear markets and recessions are facts of life.
What are the political implications? That’s almost a topic for another day given that I could go on for a while discussing them. Someday soon I’ll write a piece about how the economy no longer accurately predicts the swings of American politics given our increasingly tribal divisions, but we’ll operate here off of the long-running assumption that politicians’ political fortunes are more or less tied to the economy.
I’ll put it simply: if the clock runs out on the current economic expansion, Trump is probably screwed in 2020. That’s how American politics has worked for a while: when the economy is good, the party in power remains in power. When the economy tanks, the voters turn on the party in power and the White House usually changes hands.
But with the economy in good shape, Trump probably doesn’t have much to worry about as it stands right now. Sure, the market may be in rough shape, but in the grand scheme of things, this current 12% drop is nothing major. Obviously it could get worse, but the economy itself is not indicating any sort of long-term bear market or recession. Trump’s real worry should be getting the wall built.
One final thing to be aware of: the market’s “valuation.” Is the market over-valued or under-valued? Knowing this can help us figure out whether the market has further upside or significant downside risk. We can determine valuation by looking at the market’s overall price-to-earnings ratio. A high p/e ratio means overvalued, a low p/e ratio means undervalued. Overvalued, in turn, means there’s not much upside to be had as most of the value has probably already been squeezed out.
The Shiller P/E ratio chart goes back to 1870, and it’s probably the best metric to determine whether the market is over- or undervalued. Right now, the Shiller P/E chart shows the market is very overvalued:
We can see that at the current level of 28.3, the market has only been this expensive two times: in 1929 and during the Dot Com Bubble of the late 1990s. History shows us that the market probably doesn’t have much value left to be extracted. This is where we have to worry about “mean reversion” and that’s a bad thing because the long-term mean is right around 15.
It’s important to know where we stand in the grand scheme of things. In late 2007, just before the Great Recession and the accompanying bear market, the Shiller P/E ratio was about where it is today. The stock collapse took the market’s P/E ratio down to 15, which is close to the long-term mean.
That will happen again. It’s just a matter of when.