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MPE Capital 2020 Full-Year Letter: The Importance Of Sell Discipline

MPE Capital letter to investors for the year ended December 31, 2020. Q3 2020 hedge fund letters, conferences and more MPE Capital Performance For the year ended December 31st, 2020, MPE Capital generated net returns of 25.1% for nonqualified clients…

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MPE Capital

MPE Capital letter to investors for the year ended December 31, 2020.

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Q3 2020 hedge fund letters, conferences and more

MPE Capital Performance

For the year ended December 31st, 2020, MPE Capital generated net returns of 25.1% for nonqualified clients and 23.5% for qualified clients. For comparison, the S&P 500 TR gained 18.4% during that same time period.

MPE Capital

2020 marks the first recession MPE Capital has endured during its existence. Recessions are guaranteed to happen from time to time, and it may very well be that the next one will last much longer than this one did. Many investors are looking for investments that just go up in a straight consistent fashion. I think this is a fallacy and such line of thinking is harmful to expectational long-term results. Over the long run stock prices will follow business performance, but over the short run anything goes. To benefit from some of the best investments in history, you would have had to endure many periods of greater than 50% declines (peak-to-trough).

Using Amazon as an example, let’s say you knew that from day one it would be a terrific investment (extremely unlikely). Had you invested $10,000 in 1997 when they completed their initial public offering (IPO), today you would have about $18 million (over 37% per annum). During that twenty-three year or so period, you would have experienced some serious short-term declines along the way. In the early 2000’s, the stock price fell about 95% peak-to-trough. It also fell about 65% peak-to-trough during the global financial crisis in 2008. You also would have experienced numerous 30% plus declines, with the most recent one being in 2018.

The above example is a great reason why short-term investment performance really means nothing. Day to day, quarter to quarter, and even yearly results are generally just noise. However, over the long run (say five years plus), as long as the businesses we own continue to prosper, their stock prices and our investments, if purchased at reasonable valuations, will do just fine.

Recap Of 2020

Nobody went into 2020 anticipating what was going to unfold. The S&P 500 declined by over 35% peak-to-trough, the unemployment rate hit nearly 15%, and a projected one in six restaurants will face permanent closure. The list can go on and on, and I’m not even going to mention the tragic loss of nearly two million lives due to this terrible virus. I hope you and your loved ones are all doing well and staying safe.

Despite all the bad news, our portfolio holdings are doing fine. All of them have ample liquidity and will make it through this recession just fine. We were also fortunate to have substantial cash holdings going into the recession, giving us the ability to purchase a few new investments at bargain prices.

Contrary to popular belief, recessions are actually good things. They rid the economy of fragile businesses that probably shouldn’t be allowed to get too large. They result in new innovations that otherwise wouldn’t have occurred (think Airbnb during the global financial crisis). In a way, a recession is like a fast or a reset button for the economy. It purges away all the weak businesses (autophagy) and creates a more stable base going forward.

The most common mistake investors make during these economic resets is to panic. They panic and sell to cash, fearing the situation will only get worse. Sometimes they just want to wait for things to look more optimistic before they repurchase shares. Unfortunately, most investors tend to sell at the absolute worst time, generally at market bottoms. They then chase the market on the way up, missing out on sizeable gains due to emotional decision making.

I’m very fortunate that not a single client of MPE Capital panicked during the market declines of this year, most notably during March. Stock market prices don’t give us any information about the value of our holdings. I perform deep due diligence in order to estimate a fair price for every investment we own and will make. The only time the stock market price is important is if we are looking to buy or sell. If the market price is far below any conservative level-headed estimate of fair business value, we can take advantage by purchasing more shares. Conversely, if the market price is far above, we may sell some of our shares.

During March of this year, the market served up some serious bargains. When talking to one of my close friends and client, I compared the situation to a poker game. Imagine sitting at a poker table playing against some very tough opponents, at best over the course of a few hours you will win a few chips. However, when March rolled around, it was akin to a group of very wealthy heavily intoxicated businessmen (whales) sitting down at your table. As a more seasoned poker player at the table—you will begin to salivate (hopefully not so much so that you scare off the whales).

Sell Discipline

I’ve spent a lot of time recently thinking deeply about when to sell an investment. The more obvious reasons are (1) deteriorating business fundamentals, (2) value destructive behavior by management, (3) realizing the investment was a mistake, and (4) identifying a relatively superior investment opportunity. However, what if none of the above criteria are met? What if the business is still maintaining its competitive advantage and management is competent? What if the only factor is that the stock price is in excess of a fair estimate of intrinsic value?

Thinking about those questions, led me to consider this scenario: Imagine selling Berkshire Hathaway or Wal-Mart in the early days and missing out on the subsequent multi-decade compounding of business value. That would be a terrible mistake of omission.

However, I also want to avoid the Coca-Colas of the late 1990s, where an investment including the reinvestment of dividends returned just 0.37% per annum from July 1998 to December 2007 (peak-to-peak over a period of about ten years). Even fast forwarding to 2020, you would have earned only about 5% per annum from July 1998 (a holding period of over twenty years).

So, what’s the solution? How to avoid the Coca-Colas of 1998 but not miss out on the Wal-Marts of the 1980s? I think something critical to take into consideration is the size of a business relative to its total addressable market. In the case of Coca-Cola, the most important question was how many servings per day will they sell once mature, compared to how many servings per day they were selling at the time.

In general, I think it’s a mistake to sell a business with lots of future growth prospects just because the current market price is slightly ahead of its fundamentals. Conversely, I think it’s also a mistake not to sell a mature or nearly mature business if the market is pricing in earlystage high-tech company growth rates.

For the full year 1998, Coca-Cola sold about 200 billion servings or about 0.55 billion servings per day. In the ten years prior to 1998, servings grew about 6% annually and revenues grew about 8.5% annually. Once mature, servings should grow in line with population growth and revenues a little higher due to pricing power, let’s say about a 3% revenue growth per annum upon maturity. Taking into account they had already expanded internationally; it would be hard to imagine the business growing faster in the ten years following 1998 as compared to the prior ten years.

Taking the above into consideration—with the enormous benefits of twenty-twenty hindsight— we could forecast something along the lines of mid-single digit growth for Coca-Cola in 1998. This would be a sign that the business is far closer to maturity and its high-growth phase is probably coming to an end. Had we compared our estimates of intrinsic value in 1998 with the market price, we probably would have seen a huge disconnect. The market was pricing in far more optimistic prospects for Coke at the time; however, had our forecasts been correct, the future returns were bound to be subpar at best.

Now, let’s take a look at Wal-Mart in 1982, ten years after their initial public offering. They were generating net sales of about $2.4 billion across 491 stores in thirteen states. It wasn’t unfathomable to assume that their everyday low pricing business model (EDLP) was a huge success, and that they could easily expand across all fifty states. Fast forward to today and they have 11,500 stores across the globe and generate over $0.5 trillion in sales (up over 200x from 1982 or about 15% per annum).

In addition to the total addressable market mental model mentioned above, I also find it helpful to estimate forward five or ten year returns relative to the current market prices of our holdings. For example, if we purchase a business that I think we can sell for 6x in ten years, we will earn about 20% per annum. If that same business after year one increases in price to 4x, we will earn only about 4.6% per annum over the next nine years. If I think over the next nine years I can find an idea that will do better than 4.6% per annum, I should theoretically sell and redeploy that capital into a more favorable investment opportunity.

One inherent flaw with the above approach is that the future is always going to be uncertain. Some businesses will inadvertently stumble upon an AWS-esque1 idea that will end up boosting their future intrinsic value by a decent magnitude. Therefore, I think it only makes sense to pursue the above approach if I can be reasonably certain that the future business model and operating segments will look quite similar to the present (e.g. Coca-Cola in 2007 versus 1998). Even in the case of Wal-Mart, if the market price in 1982 reflected 20x the net sales at the time, it might make sense to sell and wait to redeploy that capital into a more favorable investment opportunity.

In conclusion, if I were to offer a heuristic or rule of thumb (everybody loves a heuristic), I would say in general it is a mistake to sell to cash, assuming none of the original four criteria are met. Ideally, I will always be selling one investment to purchase another of higher relative quality, larger relative discount to intrinsic value, or a combination of the two.

Portfolio Updates

As I mentioned in the first-half letter, we made a few new investments during the year. I discussed two of those new holdings in the previous letter (Wix and Brembo). I also made some sizeable additions to previous holdings as the market offered us deep discounts to my estimates of fair value.

One notable example being Booking Holdings. During the depths of the market panic of March, the market price reflected a half-off deal (very conservatively valued) for a well-capitalized leading accommodation travel platform run by a talented CEO. Booking Holdings had and continues to have plenty of cash on their balance sheet, a highly variable cost structure where they can shut-off advertising spend to save tons of cash (advertising was 33% of revenues in 2019), and a leading accommodations platform with deep network effects predominantly amongst independent hotel operators in Europe. There are risks that business travel may never recover to pre-covid peaks, but I don’t think leisure travel will follow that same lead—Google Images is a poor replacement for seeing the Palace of Versailles in person.

We ended up selling two large holdings throughout the year for decent gains. This unfortunately leaves us with a sizeable cash position. As I’ve stated in previous letters, I detest holding cash. Cash is a guaranteed losing investment with short-term interest rates near zero percent and inflation at two percent. Hopefully with some good old-fashioned elbow grease, I hope to uncover a few undervalued businesses to put our cash to good use.

Concluding Thoughts

It has been a wild year, and I am very grateful to have such wonderful investors who are longterm oriented and allow me to manage MPE Capital the same way as if I was just managing my own capital. I am pleased with our outperformance this year, but I am more so focused on our five and ten-year results (both absolute and relative to the averages).

I have learned a lot over the last few years, and I hope with my newfound knowledge we will enjoy very favorable returns going forward. Unfortunately, I haven’t uncovered any attractively priced opportunities recently, but I will continue going into work every day with the objective of allocating our cash into some mouthwatering investment opportunities.

I wish you all a terrific and safe 2021. Hopefully we can put this pandemic behind us soon enough and return back to a modicum of a normal life.

Sincerely,

Michael P. Ershaghi

The post MPE Capital 2020 Full-Year Letter: The Importance Of Sell Discipline appeared first on ValueWalk.

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Government

Mistakes Were Made

Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that…

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11 hours ago

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March 17, 2024

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Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that a bit during these past few years, but, if there’s one thing they’re exceptionally good at, it’s taking responsibility for their mistakes. Seriously, when it comes to acknowledging one’s mistakes, and not rationalizing, or minimizing, or attempting to deny them, and any discomfort they may have allegedly caused, no one does it quite like the Germans.

Take this Covid mess, for example. Just last week, the German authorities confessed that they made a few minor mistakes during their management of the “Covid pandemic.” According to Karl Lauterbach, the Minister of Health, “we were sometimes too strict with the children and probably started easing the restrictions a little too late.” Horst Seehofer, the former Interior Minister, admitted that he would no longer agree to some of the Covid restrictions today, for example, nationwide nighttime curfews. “One must be very careful with calls for compulsory vaccination,” he added. Helge Braun, Head of the Chancellery and Minister for Special Affairs under Merkel, agreed that there had been “misjudgments,” for example, “overestimating the effectiveness of the vaccines.”

This display of the German authorities’ unwavering commitment to transparency and honesty, and the principle of personal honor that guides the German authorities in all their affairs, and that is deeply ingrained in the German character, was published in a piece called “The Divisive Virus” in Der Spiegel, and immediately widely disseminated by the rest of the German state and corporate media in a totally organic manner which did not in any way resemble one enormous Goebbelsian keyboard instrument pumping out official propaganda in perfect synchronization, or anything creepy and fascistic like that.

Germany, after all, is “an extremely democratic state,” with freedom of speech and the press and all that, not some kind of totalitarian country where the masses are inundated with official propaganda and critics of the government are dragged into criminal court and prosecuted on trumped-up “hate crime” charges.

OK, sure, in a non-democratic totalitarian system, such public “admissions of mistakes” — and the synchronized dissemination thereof by the media — would just be a part of the process of whitewashing the authorities’ fascistic behavior during some particularly totalitarian phase of transforming society into whatever totalitarian dystopia they were trying to transform it into (for example, a three-year-long “state of emergency,” which they declared to keep the masses terrorized and cooperative while they stripped them of their democratic rights, i.e., the ones they hadn’t already stripped them of, and conditioned them to mindlessly follow orders, and robotically repeat nonsensical official slogans, and vent their impotent hatred and fear at the new “Untermenschen” or “counter-revolutionaries”), but that is obviously not the case here.

No, this is definitely not the German authorities staging a public “accountability” spectacle in order to memory-hole what happened during 2020-2023 and enshrine the official narrative in history. There’s going to be a formal “Inquiry Commission” — conducted by the same German authorities that managed the “crisis” — which will get to the bottom of all the regrettable but completely understandable “mistakes” that were made in the heat of the heroic battle against The Divisive Virus!

OK, calm down, all you “conspiracy theorists,” “Covid deniers,” and “anti-vaxxers.” This isn’t going to be like the Nuremberg Trials. No one is going to get taken out and hanged. It’s about identifying and acknowledging mistakes, and learning from them, so that the authorities can manage everything better during the next “pandemic,” or “climate emergency,” or “terrorist attack,” or “insurrection,” or whatever.

For example, the Inquiry Commission will want to look into how the government accidentally declared a Nationwide State of Pandemic Emergency and revised the Infection Protection Act, suspending the German constitution and granting the government the power to rule by decree, on account of a respiratory virus that clearly posed no threat to society at large, and then unleashed police goon squads on the thousands of people who gathered outside the Reichstag to protest the revocation of their constitutional rights.

Once they do, I’m sure they’ll find that that “mistake” bears absolutely no resemblance to the Enabling Act of 1933, which suspended the German constitution and granted the government the power to rule by decree, after the Nazis declared a nationwide “state of emergency.”

Another thing the Commission will probably want to look into is how the German authorities accidentally banned any further demonstrations against their arbitrary decrees, and ordered the police to brutalize anyone participating in such “illegal demonstrations.”

And, while the Commission is inquiring into the possibly slightly inappropriate behavior of their law enforcement officials, they might want to also take a look at the behavior of their unofficial goon squads, like Antifa, which they accidentally encouraged to attack the “anti-vaxxers,” the “Covid deniers,” and anyone brandishing a copy of the German constitution.

Come to think of it, the Inquiry Commission might also want to look into how the German authorities, and the overwhelming majority of the state and corporate media, accidentally systematically fomented mass hatred of anyone who dared to question the government’s arbitrary and nonsensical decrees or who refused to submit to “vaccination,” and publicly demonized us as “Corona deniers,” “conspiracy theorists,” “anti-vaxxers,” “far-right anti-Semites,” etc., to the point where mainstream German celebrities like Sarah Bosetti were literally describing us as the inessential “appendix” in the body of the nation, quoting an infamous Nazi almost verbatim.

And then there’s the whole “vaccination” business. The Commission will certainly want to inquire into that. They will probably want to start their inquiry with Karl Lauterbach, and determine exactly how he accidentally lied to the public, over and over, and over again …

And whipped people up into a mass hysteria over “KILLER VARIANTS” …

And “LONG COVID BRAIN ATTACKS” …

And how “THE UNVACCINATED ARE HOLDING THE WHOLE COUNTRY HOSTAGE, SO WE NEED TO FORCIBLY VACCINATE EVERYONE!”

And so on. I could go on with this all day, but it will be much easier to just refer you, and the Commission, to this documentary film by Aya Velázquez. Non-German readers may want to skip to the second half, unless they’re interested in the German “Corona Expert Council” …

Look, the point is, everybody makes “mistakes,” especially during a “state of emergency,” or a war, or some other type of global “crisis.” At least we can always count on the Germans to step up and take responsibility for theirs, and not claim that they didn’t know what was happening, or that they were “just following orders,” or that “the science changed.”

Plus, all this Covid stuff is ancient history, and, as Olaf, an editor at Der Spiegel, reminds us, it’s time to put the “The Divisive Pandemic” behind us …

… and click heels, and heil the New Normal Democracy!

Tyler Durden Sat, 03/16/2024 - 23:20

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International

“Extreme Events”: US Cancer Deaths Spiked In 2021 And 2022 In “Large Excess Over Trend”

"Extreme Events": US Cancer Deaths Spiked In 2021 And 2022 In "Large Excess Over Trend"

Cancer deaths in the United States spiked in 2021…

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March 16, 2024

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"Extreme Events": US Cancer Deaths Spiked In 2021 And 2022 In "Large Excess Over Trend"

Cancer deaths in the United States spiked in 2021 and 2022 among 15-44 year-olds "in large excess over trend," marking jumps of 5.6% and 7.9% respectively vs. a rise of 1.7% in 2020, according to a new preprint study from deep-dive research firm, Phinance Technologies.

Algeria, Carlos et. al "US -Death Trends for Neoplasms ICD codes: C00-D48, Ages 15-44", ResearchGate, March. 2024 P. 7

Extreme Events

The report, which relies on data from the CDC, paints a troubling picture.

"We show a rise in excess mortality from neoplasms reported as underlying cause of death, which started in 2020 (1.7%) and accelerated substantially in 2021 (5.6%) and 2022 (7.9%). The increase in excess mortality in both 2021 (Z-score of 11.8) and 2022 (Z-score of 16.5) are highly statistically significant (extreme events)," according to the authors.

That said, co-author, David Wiseman, PhD (who has 86 publications to his name), leaves the cause an open question - suggesting it could either be a "novel phenomenon," Covid-19, or the Covid-19 vaccine.

"The results indicate that from 2021 a novel phenomenon leading to increased neoplasm deaths appears to be present in individuals aged 15 to 44 in the US," reads the report.

The authors suggest that the cause may be the result of "an unexpected rise in the incidence of rapidly growing fatal cancers," and/or "a reduction in survival in existing cancer cases."

They also address the possibility that "access to utilization of cancer screening and treatment" may be a factor - the notion that pandemic-era lockdowns resulted in fewer visits to the doctor. Also noted is that "Cancers tend to be slowly-developing diseases with remarkably stable death rates and only small variations over time," which makes "any temporal association between a possible explanatory factor (such as COVID-19, the novel COVID-19 vaccines, or other factor(s)) difficult to establish."

That said, a ZeroHedge review of the CDC data reveals that it does not provide information on duration of illness prior to death - so while it's not mentioned in the preprint, it can't rule out so-called 'turbo cancers' - reportedly rapidly developing cancers, the existence of which has been largely anecdotal (and widely refuted by the usual suspects).

While the Phinance report is extremely careful not to draw conclusions, researcher "Ethical Skeptic" kicked the barn door open in a Thursday post on X - showing a strong correlation between "cancer incidence & mortality" coinciding with the rollout of the Covid mRNA vaccine.

Phinance principal Ed Dowd commented on the post, noting that "Cancer is suddenly an accelerating growth industry!"

Continued:

Bottom line - hard data is showing alarming trends, which the CDC and other agencies have a requirement to explore and answer truthfully - and people are asking #WhereIsTheCDC.

We aren't holding our breath.

Wiseman, meanwhile, points out that Pfizer and several other companies are making "significant investments in cancer drugs, post COVID."

Phinance

We've featured several of Phinance's self-funded deep dives into pandemic data that nobody else is doing. If you'd like to support them, click here.

 

Tyler Durden Sat, 03/16/2024 - 16:55

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Government

Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Authored by Mike Shedlock via MishTalk.com,

Young adults are more…

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1 day ago

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March 16, 2024

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Gen Z, The Most Pessimistic Generation In History, May Decide The Election

Authored by Mike Shedlock via MishTalk.com,

Young adults are more skeptical of government and pessimistic about the future than any living generation before them.

This is with reason, and it’s likely to decide the election.

Rough Years and the Most Pessimism Ever

The Wall Street Journal has an interesting article on The Rough Years That Turned Gen Z Into America’s Most Disillusioned Voters.

Young adults in Generation Z—those born in 1997 or after—have emerged from the pandemic feeling more disillusioned than any living generation before them, according to long-running surveys and interviews with dozens of young people around the country. They worry they’ll never make enough money to attain the security previous generations have achieved, citing their delayed launch into adulthood, an impenetrable housing market and loads of student debt.

And they’re fed up with policymakers from both parties.

Washington is moving closer to passing legislation that would ban or force the sale of TikTok, a platform beloved by millions of young people in the U.S. Several young people interviewed by The Wall Street Journal said they spend hours each day on the app and use it as their main source of news.

“It’s funny how they quickly pass this bill about this TikTok situation. What about schools that are getting shot up? We’re not going to pass a bill about that?” Gaddie asked. “No, we’re going to worry about TikTok and that just shows you where their head is…. I feel like they don’t really care about what’s going on with humanity.”

Gen Z’s widespread gloominess is manifesting in unparalleled skepticism of Washington and a feeling of despair that leaders of either party can help. Young Americans’ entire political memories are subsumed by intense partisanship and warnings about the looming end of everything from U.S. democracy to the planet. When the darkest days of the pandemic started to end, inflation reached 40-year highs. The right to an abortion was overturned. Wars in Ukraine and the Middle East raged.

Dissatisfaction is pushing some young voters to third-party candidates in this year’s presidential race and causing others to consider staying home on Election Day or leaving the top of the ticket blank. While young people typically vote at lower rates, a small number of Gen Z voters could make the difference in the election, which four years ago was decided by tens of thousands of votes in several swing states.

Roughly 41 million Gen Z Americans—ages 18 to 27—will be eligible to vote this year, according to Tufts University.

Gen Z is among the most liberal segments of the electorate, according to surveys, but recent polling shows them favoring Biden by only a slim margin. Some are unmoved by those who warn that a vote against Biden is effectively a vote for Trump, arguing that isn’t enough to earn their support.

Confidence

When asked if they had confidence in a range of public institutions, Gen Z’s faith in them was generally below that of the older cohorts at the same point in their lives. 

One-third of Gen Z Americans described themselves as conservative, according to NORC’s 2022 General Social Survey. That is a larger share identifying as conservative than when millennials, Gen X and baby boomers took the survey when they were the same age, though some of the differences were small and within the survey’s margin of error.

More young people now say they find it hard to have hope for the world than at any time since at least 1976, according to a University of Michigan survey that has tracked public sentiment among 12th-graders for nearly five decades. Young people today are less optimistic than any generation in decades that they’ll get a professional job or surpass the success of their parents, the long-running survey has found. They increasingly believe the system is stacked against them and support major changes to the way the country operates.

Gen Z future Outcome

“It’s the starkest difference I’ve documented in 20 years of doing this research,” said Twenge, the author of the book “Generations.” The pandemic, she said, amplified trends among Gen Z that have existed for years: chronic isolation, a lack of social interaction and a propensity to spend large amounts of time online.

A 2020 study found past epidemics have left a lasting impression on young people around the world, creating a lack of confidence in political institutions and their leaders. The study, which analyzed decades of Gallup World polling from dozens of countries, found the decline in trust among young people typically persists for two decades.

Young people are more likely than older voters to have a pessimistic view of the economy and disapprove of Biden’s handling of inflation, according to the recent Journal poll. Among people under 30, Biden leads Trump by 3 percentage points, 35% to 32%, with 14% undecided and the remaining shares going to third-party candidates, including 10% to independent Robert F. Kennedy Jr.

Economic Reality

Gen Z may be the first generation in US history that is not better off than their parents.

Many have given up on the idea they will ever be able to afford a home.

The economy is allegedly booming (I disagree). Regardless, stress over debt is high with younger millennials and zoomers.

This has been a constant theme of mine for many months.

Credit Card and Auto Delinquencies Soar

Credit card debt surged to a record high in the fourth quarter. Even more troubling is a steep climb in 90 day or longer delinquencies.

Record High Credit Card Debt

Credit card debt rose to a new record high of $1.13 trillion, up $50 billion in the quarter. Even more troubling is the surge in serious delinquencies, defined as 90 days or more past due.

For nearly all age groups, serious delinquencies are the highest since 2011.

Auto Loan Delinquencies

Serious delinquencies on auto loans have jumped from under 3 percent in mid-2021 to to 5 percent at the end of 2023 for age group 18-29.Age group 30-39 is also troubling. Serious delinquencies for age groups 18-29 and 30-39 are at the highest levels since 2010.

For further discussion please see Credit Card and Auto Delinquencies Soar, Especially Age Group 18 to 39

Generational Homeownership Rates

Home ownership rates courtesy of Apartment List

The above chart is from the Apartment List’s 2023 Millennial Homeownership Report

Those struggling with rent are more likely to be Millennials and Zoomers than Generation X, Baby Boomers, or members of the Silent Generation.

The same age groups struggling with credit card and auto delinquencies.

On Average Everything is Great

Average it up, and things look pretty good. This is why we have seen countless stories attempting to explain why people should be happy.

Krugman Blames Partisanship

OK, there is a fair amount of partisanship in the polls.

However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.

OK, there is a fair amount of partisanship in the polls.

However, Biden isn’t struggling from partisanship alone. If that was the reason, Biden would not be polling so miserably with Democrats in general, blacks, and younger voters.

This allegedly booming economy left behind the renters and everyone under the age of 40 struggling to make ends meet.

Many Are Addicted to “Buy Now, Pay Later” Plans

Buy Now Pay Later, BNPL, plans are increasingly popular. It’s another sign of consumer credit stress.

For discussion, please see Many Are Addicted to “Buy Now, Pay Later” Plans, It’s a Big Trap

The study did not break things down by home owners vs renters, but I strongly suspect most of the BNPL use is by renters.

What About Jobs?

Another seemingly strong jobs headline falls apart on closer scrutiny. The massive divergence between jobs and employment continued into February.

Nonfarm payrolls and employment levels from the BLS, chart by Mish.

Payrolls vs Employment Gains Since March 2023

  • Nonfarm Payrolls: 2,602,000

  • Employment Level: +144,000

  • Full Time Employment: -284,000

For more details of the weakening labor markets, please see Jobs Up 275,000 Employment Down 184,000

CPI Hot Again

CPI Data from the BLS, chart by Mish.

For discussion of the CPI inflation data for February, please see CPI Hot Again, Rent Up at Least 0.4 Percent for 30 Straight Months

Also note the Producer Price Index (PPI) Much Hotter Than Expected in February

Major Economic Cracks

There are economic cracks in spending, cracks in employment, and cracks in delinquencies.

But there are no cracks in the CPI. It’s coming down much slower than expected. And the PPI appears to have bottomed.

Add it up: Inflation + Recession = Stagflation.

Election Impact

In 2020, younger voters turned out in the biggest wave in history. And they voted for Biden.

Younger voters are not as likely to vote in 2024, and they are less likely to vote for Biden.

Millions of voters will not vote for either Trump or Biden. Net, this will impact Biden more. The base will not decide the election, but the Trump base is far more energized than the Biden base.

If Biden signs a TikTok ban, that alone could tip the election.

If No Labels ever gets its act together, I suspect it will siphon more votes from Biden than Trump. But many will just sit it out.

“We’re just kind of over it,” Noemi Peña, 20, a Tucson, Ariz., resident who works in a juice bar, said of her generation’s attitude toward politics. “We don’t even want to hear about it anymore.” Peña said she might not vote because she thinks it won’t change anything and “there’s just gonna be more fighting.” Biden won Arizona in 2020 by just over 10,000 votes. 

The Journal noted nearly one-third of voters under 30 have an unfavorable view of both Biden and Trump, a higher number than all older voters. Sixty-three percent of young voters think neither party adequately represents them.

Young voters in 2020 were energized to vote against Trump. Now they have thrown in the towel.

And Biden telling everyone how great the economy is only rubs salt in the wound.

Tyler Durden Sat, 03/16/2024 - 11:40

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