DIASTOLE ECONOMIC AND MARKET COMMENT
July 9, 2018
The year is half over, Mark Zuckerberg has passed Warren Buffett to become the third richest person in the world ($81.6 billion) and (as of this writing) eight Thai soccer players have been rescued from a flooding cave. Also, we are waiting to hear the President’s nominee for the vacancy on the Supreme Court, a NATO meeting (we expect geopolitical fireworks) will convene on Wednesday, and Russia is out of the World Cup. And Wimbledon!
So, it is no wonder if you have been preoccupied. Here’s what else happened in the past week.
The jobs report for June came in better than expected with 213,000 net new jobs created. The unemployment rate rose from 3.8% to 4.0% - reflecting the 600,000 people who entered or reentered the job market. College graduates, anyone?
The U.S. deployed tariffs on Chinese goods on Friday, and was immediately met with retaliatory Chinese tariffs. $34 billion worth of goods are affected on each side - about 0.1% of GDP for each country. The U.S. is taxing everything from machinery to electronic parts, while China is targeting American farmers in states which voted for the President. Trade talks between the nations have broken down, and both sides are threatening additional tariffs.
The Wall Street Journal has reported that the long-touted Saudi Aramco initial public offering (IPO) scheduled originally for this year and then postponed until 2019, is now in doubt again. The state-run oil company is apparently growing nervous about the financial scrutiny that would accompany the world’s largest IPO.
In technology-can’t-possibly-be-bad-can-it? news, Facebook warned 800,000 users that it had accidentally unblocked people they had already blocked. Samsung smartphone users reported that their phones were randomly sending private photos to people on their contacts list, and millions of gmail users’ inboxes can be accessed by hundreds of app makers. If you use email-based apps like travel and shopping services, you may be especially vulnerable. Over $761 million was stolen from crypto-currency exchanges so far this year, only about 20% of which is traceable. Lifelock is now officially recommending that you keep your passwords on a yellow legal pad which you hide in your underwear drawer. (That may not be entirely true.)
Expected to impact unemployment rates 21 years from now: the U.S. fertility rate is its lowest ever for the second year in a row. The top several reasons couples give for not having (or having more) children are related to financial uncertainty. In a related story, Social Security is expected to go belly-up 21 years from today. Remember that it is not just for cracking crabs and picking lettuce that we need robust immigration.
If you owe more than $50,000 in overdue taxes, the federal government will deny you a passport or a passport renewal. Right now 362,000 Americans are affected. Current passports are not being revoked for overdue taxes. Yet.
Volkswagen is opening Rwanda’s first car-assembly plant. One problem? Rwandans can’t afford to buy new VWs, which cost 33 times the average annual Rwandan income. Rwandans who have cars usually buy them old and used. Solution? VW is going to put its new vehicles into a ride-hailing car-sharing program beginning in the fall. Once they are used, the cars will then be sold.
Massachusetts has sued 16 people in connection with America’s opioid crisis, claiming that Purdue, the maker of OxyContin, “created the epidemic and profited from it through a web of illegal deceit.” 63,600 people died from opioid overdoses in 2016. That is more than died from suicide (about 45,000) or from traffic accidents (about 40,000).
There is more news on the trucker shortage that we discussed last week. About 75% of all freight in the U.S. is moved by truckers. We are currently about 7% short (roughly 60,000) of the number of drivers that we need, and the shortfall is even worse in some other countries. The American shortfall is expected to grow to over 150,000 by 2026. It is not surprising. After all, would you begin a career in typewriter repair now? Still, before autonomous semis take over the industry, costs are expected to rise drastically, and will no doubt be passed along to consumers.
The next Amazon Prime Day is coming on July 16th. ONE WEEK TO GO! And instead of just one day, the Prime Day will be 36 hours long. I hope it’s a really successful business promotion, because sometimes I feel sorry for Jeff Bezos, just sitting around by himself, hoping I need more laundry detergent.
The Centers for Disease Control (CDC) has tips for washing your hands. For instance, it takes 20 seconds of good sudsing to clean off the germs you got from _______________ (insert your own germ-phobia here; mine is the downtown 1 train). So, turn off the water while you lather! Also, sing the alphabet song once or Happy Birthday twice, to make sure that 20 seconds have passed. And if you’re in a public restroom, beware of the public. If they’re not singing, steer clear!
For the week ending July 6th, the Standard & Poor’s 500 finished at 2,759, the Dow Jones Industrials at 24,456, and the Nasdaq Composite Index at 7,688. The yield on the ten-year Treasury closed at 2.82%. Oil cost $73.80 per barrel, gold cost $1,254.30 per ounce, and one Euro was worth $1.1741.
Elizabeth E. Cook
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including Barron’s, The Wall Street Journal, The New York Times, The Economist, Bloomberg, businessinsider.com, CNBC, and Reuters. If you have questions, please call us at 203.458.5220 or reply to this email. Thank you for your attention!