Economy

Rumors

Here in the north side of Central Florida, we are experiencing shortage in frozen vegetables, along with beverages of sports drinks like Gatorade, along with canned soups being picked over. The last time I was at the store, a woman there told me that she and her husband had arrived from Pennsylvania several days before, and that area was having shortages in toilet paper and frozen vegetables. Meats were in good supply but expensive.

J KB is reporting shortages of various supplies in the Carolinas.

Things like shampoo, body wash, mouth wash, cleaning supplies, foot spray, OTC drugs, were low, especially the store brand generics.

Any other shortages in other areas of the country?

Today I went to Walmart at lunch and it took was low on a lot of non-food supplies.

By Divemedic, ago

Welcome to the Kubuki Theater

Every couple of years, the Democrats and the Republicans engage in this stupid play. The plot is always the same: The country has borrowed to its supposed “debt ceiling,” and the Democrats want to raise it. The Republicans “refuse” to do so unless they get some concessions. The government gets “shut down” while they argue about it, until the Democrats eventually make some sort of deal, then the Republicans declare victory, raise the debt ceiling, and everyone pats themselves on the back.

Except the debt ceiling, concessions, the shut down, refusal, all of it, is fake. None of it actually exists, nor did anything actually change. It’s all theater.

By Divemedic, ago

Rats

The rats are fleeing the sinking ship that is the US economy. The regional Presidents of the Fed, who affect the economy far more than POTUS does, are busy dumping US dollar denominated securities ahead of the Fed’s expected decision to taper off on buying bonds and securities. This policy saw the Fed propping up Wall Street by purchasing stocks, bonds, and securities using dollars that they were creating out of thin air. Worse, they were purchasing those items from their own personal accounts.

This policy of using money created out of thin air has artificially propped up stock prices for years. It has also apparently been lucrative for the officials at the Fed. Now that this policy is coming to an end, the market will take a hit.

Now the officials at the Fed have decided to come clean and get out, coincidentally at the same time the Fed is to stop buying. I have a friend who is an executive at a large New York bank. He is prohibited from doing this, and his stock purchases are watched closely by the SEC to prevent insider trading to the point where he doesn’t bother because the bureaucratic hoops are too onerous. The people in the government are apparently exempt. (Yes, I know the Fed is an NGO, but that is smoke and mirrors)

I only have a few assets still in the market. A 401K, and a couple of stocks that pay dividends at the end of the quarter. I am waiting until the dividends pay out, then those stocks are gone as well. I’ve held them for over a year, so I only pay the long term capital gains rate on the profits.

By Divemedic, ago

Shortages

In a comment to a recent post on signs of the collapse, HomePlace asks:

When I see reports of shortages from what I believe are credible sources, I’ve been making sorties to see what I see locally. These trips in the last several weeks have been limited to grocery and home improvement stores. I haven’t seen evidence yet here in the midwest of shortages. Are shortages regional at this point? Thoughts, theories?

There are shortages, but they are being stealthy about it. My local grocery store isn’t doing anything so obvious as to leave shelves bare. A great example:
The canned soup section was most of one side of an entire aisle just before COVID began. Now the selection is much smaller, and the soup section has shrunk down to less than half the size that it was. The produce doesn’t look as good as it used to- more blemishes, more wilting on the leafy greens, that sort of thing. There are other signs, let’s take a look:

By Divemedic, ago

Inflation is how much?

The Federal government is claiming that inflation is only 5.3 percent per year. This is despite the fact that energy is up 25%, gasoline is up 42%, and car prices are up 31.9% from a year ago. Home prices are increasing at a record pace, with June seeing an 18.6% rise– not an annual rise, an 18.6% rise in just one month. Year over year, home prices are up by about 31% year over year. (pdf alert)

We are being mislead. Anyone who buys anything and pays attention to prices knows it.

Meanwhile, stock market investors are happy. Good. I am trying to sell all of my holdings by the end of the year. Read this story to see why.

By Divemedic, ago

Signs of the collapse

Back in 2007, there were hints that a financial disaster were coming, it’s just that many of them were simply missed, even though they were obvious in hindsight. As a firefighter, I saw them: Multiple families living in brand new, expensive homes without a stick of furniture. They could barely make the payment on their adjustable rate balloon mortgage, so they certainly couldn’t afford furniture. All it took was an increase in gas prices to set off the entire mortgage collapse.

There are again signs of an impending financial disaster, and they are everywhere. For example:

My in-laws were in Maine for the summer. They returned last week. Just before they returned, my wife went over to their house to prepare it for their arrival. While she was there, she smelled something odd, like rotting garbage. The smell was coming from the refrigerator. Even though the display on the door said it was cold, it was not. All of the food had rotted.

After a rather nasty cleaning session, the in-laws returned home. They went shopping for a new refrigerator, and there were not many to be had. It turns out that there is no supply coming from overseas, where most of them are made. The ones that ARE getting through are not enough to meet demand. There are lengthy backorders.

Yet another sign that the economy is grinding to a halt is coming from the auto industry. GM and Ford have suspended the production of pickup trucks because of the shortage in computer chips. This is a disaster for Ford Motor Company. All Ford makes is trucks, SUVs, and the Mustang. Ford reports that its sales are down 32 percent.

Total Ford Motor Company sales during July 2021 decreased 32 percent from last July, selling only 120,053 units. Sales of cars were hit hardest, with a 78% reduction to 4,365 units. Trucks were down 38 percent to 72,574 units, and SUV sales dropped 35 percent to 43,114 units.

That news was bad enough, but was ever worse for August, as Ford sales dropped 33 percent in August from the same month last year.

If this is a disaster for Ford, it is also a disaster for the US economy. Ford is the 21st largest company in the USA, and GM is the 22nd.

We are seeing shortages in all sorts of things: supplies are hard to find. Chicken, lumber, microchips, gas, steel, metals, chlorine, and ketchup packets are all in short supply. We shut down the world’s economy, and it is not wanting to restart. We can’t even get people to return to work.

“Experts” can argue about it for months, but no matter the cause, the result is the same. This slowdown of the economy is going to continue for months, perhaps several years. How many businesses will fail as a result is anyone’s guess. One thing is for sure, though. The economy is going to get much, much worse. Inflation is going to increase markedly as the law of supply and demand begins to take hold. Once Suzy Soccermom figures out that there is a problem, expect panic buying and even more shortages as she begins to panic shop for things.

The things that begin to skyrocket in price and see scarcity will probably not make sense. Remember the toilet paper shortage of last year? Like that, but with more products being involved.

I am getting completely out of the stock market. We began a complete sell off last week. As soon as funds are released, we are moving into other investments, things that are not based in the US dollar.

By Divemedic, ago

Inflation and rent

For months, I have been telling you that the eviction moratorium is killing the rental market. The US dollar is taking a beating. These two factors are coming together to increase rents more than they ever have before.

The central Florida area has seen rental prices increase by more than 20 percent in the past 8 months. This is a housing inflation rate of 30 percent. At this rate, rents will double every 2.5 years. To put this in perspective, the average rent increase seen before COVID was 7%, but this year is seeing rents increase at three times that rate.

This means that our inflation is far, far higher than what we are being told. I am guessing that overall inflation is somewhere near 25% or so. The wheels are coming off.

By Divemedic, ago

Quote of the day

Goes to John at Wilder, Wealthy, and Wise.

The (metaphorical) printing presses have been shoveling money into the economy under the mistaken assumption that all we need is additional debt to keep the engine going. It’s like a demented congressman who doesn’t understand engines deciding to open up the hood of an F-150® to just pour gasoline on it using the dim understanding of a toddler that, “gasoline makes engines go, so if I pour enough gasoline on the engine, it will be as fast as a spaceship.”

The US is falling apart. We are looking at a complete economic collapse. Right after the dollar goes, the government will follow. Go, read the whole thing.

By Divemedic, ago

There you go again

The Democrats are proposing a new tax (what else is new?) and are lying about who will pay it. (again) They are claiming that billionaires are using this magic method to avoid paying capital gains taxes. What is the magic method?

They don’t pay capital gains tax until they actually have capital gains to tax.

When you buy an asset and sell it for more than you paid, the difference is called a capital gain. There are two types of capital gains: long term, and short term. A short term capital gain is one where the asset was held for less than a year. Short term gains are taxed the same as income. A long term capital gain is for an asset held longer than a year, and is taxed at a lower rate than is ordinary income.

As anyone who has ever bought and sold anything should know, the value of anything you own will fluctuate with the market. If I own a classic car, say a 1965 Mustang, it could have a “value” that changes from year to year. That value is purely theoretical until I actually sell it. If I look up my car and see the profit I could make on that car, that profit is called an unrealized gain, and it only exists on paper. Once I sell and actually make money on the car, it becomes a realized gain.

What the Democrats want to do, is tax people on the unrealized gains that they have on assets that they own. They claim that people who own assets that have increased in value, but haven’t paid capital gains taxes on, is some kind tax dodge. They are ignoring the fact that an asset may be worth less one year than it was the year before. They are also trying to claim that only billionaires do this.

“No nurse or firefighter or teacher in America can play those games,” said Wyden. “They pay their taxes with every paycheck and are rightfully outraged when they read about the wealthiest few paying so little while they are working hard to make ends meet.”

This is the big lie. My wife bought the house we live in twelve years ago. The purchase price was about half what Zillow says it is worth now. If we were to sell it, the profit would be a capital gain. The democrat proposal would have us pay taxes on that “profit” every year- even if we didn’t sell. The fact that we don’t do that now isn’t some dodge that only billionaires use- every homeowner in America is going to get hit by this proposed tax.

By Divemedic, ago