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2023-09-12 07:00 by Karl Denninger
in Consumer , 376 references Ignore this thread
The Consumer Is Strong!
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Uh, no he isn't.

He's maxed out on his plastic, he's wondering if next week the food bill is going to go up another $20, he's watching gas prices like a hawk and expecting trouble there too, he is being hounded at his job to "do more for the same pay" and more.

And those are the producing ones.  The folks who are not inclined to produce, and there's a lot of them, are sensing the Sword of Damocles over their heads.  This was always the problem with "RIP" (Retire In Place) or "DTL" (Do The Least) which many adopted and some even advocated post-lockdown.  It seemed like a reasonable bid if and only if the labor market was continually and permanently "tight" -- that not only would it be hard to replace you but your job had to be done and the firm couldn't manage without anyone in your position at all.

I get it when it comes to incentives; training people that they they're "worth" $30,000/year tax free (which is about $50,000/yr from a job, when you account for all the taxes such as FICA, income tax and similar) to sit at home and get drunk, stoned or whatever during the pandemic, which we did, was idiotic.  That is more than a huge percentage of people can generate with their current and, in some a decent percentage of cases, their highest level of skill and earnings capacity.  Doing that was beyond stupid but it continues a trend that goes back decades of considering people worthy of a check not because they did something but simply because they exist.  People call this "compassion" but it isn't at all: It destroys the motivation to better oneself and worse, to the extent the give-away is greater than the person's current earning potential it may well permanently destroy their incentive to better themselves because that which they got once without effort they now believe they can get again, not due to their own industriousness and effort but simply by screaming at the right people in the right way, whether that's by voting, agitating, burning or just taking.

Go feed a bear some human-style food a few times whether by intentionally putting it out there or through stupidity (e.g. an un-secured outdoor trash bin.)  When the food disappears said bear will now try to eat you to get more and you'll have to shoot it lest it kill you or your child.  This outcome is not the bear's fault -- it is your fault because you created the association between easy food and humans.  Thus it should be a really big shock when we give away things to invading people or simply those who would have to work hard to meet basic needs and, when that ceases to satisfy what they "deserve" they trash everything within reach and steal or even murder to get more "easy" -- right?

Here's the ugly part: The same sort of mental gymnastics applies to anyone who gets without earning it or otherwise by reasonable progression of society and doesn't recognize that was a windfall, but rather is led to believe the "gain" is something they have a "right" to continue to possess.

Heh Mr. or Ms. American, what's that crap you've been running your mouth about and letting the media and politicians shove in your head with regard to your house price -- or stock portfolio -- again?

Did you do anything personally to make that property more-valuable? Nope.

Did you do anything personally to make the price of Tesla or Nvidia stock go up?  Nope.

Why do you think you're owed that price?

A lot of you think you indeed are -- in fact, I hear all the time "this can't come back out."

Oh yes it can, and yes it has in the past.  In fact 50% losses in the stock market happen fairly regularly!  We haven't had one  in the stock market that has "stuck" for a decade or more in quite some time (close to 100 years now) but that has happened too and I might remind you that the time before it recovers exceeds your remaining time before you need to spend any of it then it may as well not recover at all from your personal point of view.

All those places you've heard about that can't attract sufficient employees at the offered wages and which is, in fact, due to the pandemic $600/week handouts and the "training" it did in people's minds are real.

But you, fellow American, probably believe if you're not only of "those people" -- you know, the folks looting stores, stealing anything not nailed down, or those "unable to find help" in the economy -- almost-certainly think you're not one of "them."

If you're one of those people who believe that the ramp in your house's "value" over the last three years is in fact "yours" and it "can't and won't" go back down, indeed, if you think the increases since 2003 or so are "yours", or that the insane expansion of multiples in the stock market, again all driven by "gimmes" from Congress buying votes which it can no longer afford to do without them showing up immediately and in greater amount in inflation, will not and cannot come back out you are exactly the same in your mental space as the person who refuses to work for $10/hr because he or she got $600/wk to sit at home and get drunk, or who smashes and grabs out of the store because they are "owed" it.

It is the precise same mental thought process folks as exactly zero of you have earned a single nickel of that alleged "appreciation" through the actions of your own hands and mind.

Welcome to a Hell of your own making, America.

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Cmoledor 2k posts, incept 2021-04-13
2023-09-12 07:52:05

Damn. Reality bites doesnt it??

The whole world is one big ****ing scam
Full throttle till the end. Ocdawg
Take the stick you tried to beat me with and go **** your own face. Ishmael
Invisiblesun 836 posts, incept 2020-04-08
2023-09-12 07:52:05

Values will go down. Question is will it be by a decline in asset prices or by deflation of the currency. I see a Treasury and Federal Reserve that would rather reduce the value of the dollar than have asset prices collapse.

No politician or political appointee wants to be blamed for causing economic collapse. So the "do nothing and pray" policy is what we get. But someone will be the first to panic. Likely bond holders. Then the circus really gets going.
Tonythetiger 940 posts, incept 2019-01-27
2023-09-12 07:52:05

Benjamin Graham wrote..
The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.

This is the principle that has turned my investments into a winning proposition. If you are reasonably certain that the dividends will keep arriving, then the price of your stock is a secondary concern. If fact, lower prices means you can buy more dividend income when you have cash to invest and the courage to pull the trigger.

For those who elect to go the indexing route the price is a primary concern because the only way to reap your returns is to sell shares, so TG's warning in that regard is spot on. Price multiples for the high flying stonks of today can and will eventually revert to more normal levels as they always have in the past.

Lots of people will re-learn this lesson the hard way soon enough. Try to avoid being one of them if at all possible.

Reality is going to reassert itself eventually and it won't be pretty (in many dimensions).

"War is when the Government tells you who the bad guy is. Revolution is when you decide that for yourself." - Benjamin Franklin
Frat 13k posts, incept 2009-07-15
2023-09-12 08:17:15

A lot of you think you indeed are -- in fact, I hear all the time "this can't come back out."


Yeah, I'll take the other side of that bet.

I still consider my house "worth" about what we paid for it in 2005, completely disregarding that I could sell it for 2.5x that now (maybe more if someone really wanted the only two story in bilevel hell). But we'd have to find a place to live, no? And with mortgage rates at triple what we got on our refinance (locked in the rate literally on the last day before they started ramping up) as well as similar ramps in prices on the buying end, why the hell would I even consider it now?

It might have taken a decade or two longer than any of us thought it would or could, but it's coming. Enjoy what you have while you have it, folks. I don't think it gets any better from here until I'm on the other side of the dirt.

We're ****ed. There will be no happy ending here; there is no going back to 'normal.'. There are only bad outcomes and worse outcomes. And we don't get to choose those, either.
Jpg 888 posts, incept 2009-03-23
2023-09-12 08:17:26

When the stock market crashed in '29 the DJIA finally bottomed-out at roughly 10% of its peak.

And didn't recover to the previous peak for a quarter-century.
Kiwiapsa 45 posts, incept 2021-09-12
2023-09-12 08:28:11

There's no doubt that many, many people have been trying to keep up with inflation with plastic. I believe the last report I saw is that credit card debt is now up over a trillion dollars and trending up. At an average rate of over 24%. An inevitable reckoning for millions. In Michigan, one of the things I've noticed over the last couple of years is the 5-, 10-, or 20-dollar totals on fuel pumps when filling up the car even though the cost of gas is so high. A small but telling indicator.
Tickerguy 198k posts, incept 2007-06-26
2023-09-12 08:29:16

Yep @Kiwiapsa - people often claim "well some people use them as a convenience." Uh, the DEBT CARRIED isn't convenience users; a person like me who uses it that way contributes exactly ZERO to the "debt on credit cards" because at the end of every month the balance is paid off and it is thus zero debt.

"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."
Dingleberry 831 posts, incept 2011-11-06
2023-09-12 08:42:25

The stimis and lockdowns did both financial damage (inflation) and psychological damage (i.e. RIP or leave) the workforce.

The "great resignation", so called. I would add the (for lack of a better word) laziness is worse than the inflation. The latter is the main reason why inflation is still running rampant, despite dramatic rises in interest rates that should have had far more of a slowing economic effect by now. But those rates haven't. Why?

Because no matter the rise in one wants to work. And this is pushing inflation, regardless of rates. Outputs of goods and services are still beneath demand. I have met several (and read many stories) over the recent past by those who quit, or (especially women) who won't do anything but telework jobs, if at all.

The two years of lockdowns definitely got many in the habit of "working" form home. An object at rest tends to stay at rest. Physics 101. Seems like many did the math and when you back out the costs for transportation, eating lunches out, etc. etc. the case for not working legit is quite compelling. I have seen reports of up to a 1/3rd of women not willing to come back to the office. Ever. What do you think this does to wages or labor supply? Then throw in the disabilities from the jab (a jabbed acquaintance just died yesterday of turbo cancer---under a year out of the blue).

I would bet my left nut that actual inflation from all the bull****ttery stemming from the wu flu is 30%. At least.

Who got raises like that? Ironically, the only ones I know of that did are fast food workers and the like. The "fight for $15" dollars per hour is so last decade. Now it's not uncommon to see help wanted ads for a couple dollars over that. To start.

So enjoy that 10 buck happy meal! And let's print and send another hundred billion to Ukraine, too.

The Fed has not achieved what they need to, despite their inflationary gaslighting. Current unemployment has to probably double to get real costs down. With an election year is upcoming. Should be quite interesting.
Tickerguy 198k posts, incept 2007-06-26
2023-09-12 08:44:54

@Dingleberry -
I have seen reports of up to a 1/3rd of women not willing to come back to the office. Ever. What do you think this does to wages or labor supply?

This actually could be a good thing. Oh, women don't want to work? Gee, what else could they do? Wellllll....

Oh wait, they get off the hamster wheel? Well then, that means household income falls, which means house PRICES have to come down materially (like by 2/3rds or more!) and now a couple with one earner can afford one.

Oh my, look at that. Balance gets restored.

"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."
Orangecrush 188 posts, incept 2018-09-29
2023-09-12 08:50:31

Everybody wants to ride in the wagon of free ****, nobody wants to pull and pay the freight.

Something wicked this way comes...

CCR said it well:
I see a bad moon a rising, I see trouble on the way...
Ajkalian 207 posts, incept 2015-09-16
2023-09-12 09:00:30

None of the smart people saw this coming.
And something like this might happen again.

Eoinw 168 posts, incept 2021-07-14
2023-09-12 09:01:10

Just wondering what the labour shortage situation is in the USA. North of the border it is still shocking and getting worse.

In my grocery store, every department is desperate for help. Even with $15 minimum wage, they can't find workers, nor hold on to the ones they do find. Plus the part timers get offered full time($22 per hour) very quickly now. Yet still no workers available.

I try to blame this on basic math but it doesn't add up. Two baby boomer parents hit 65 and retire to be replaced by their two kids. Even if it's just one kid, or none, that doesn't account for the bottom falling out of the labour market. Are young people staying home(or going to college) and running up debt while they have ZERO income?

The only conclusion I can reach is that the entire economic system is broken and the labour shortage is a symptom of the disease.
Shadowmask 6k posts, incept 2021-05-24
2023-09-12 09:01:31

If 1/3 of women stay out of the labor force, wages will rise slightly to entice replacements or pay those doing more work in addition to prices coming down.

The learning curve for being dead is steep, but everyone gets it down pat on the first go usually.--Thystra, March 28, 2023
Eoinw 168 posts, incept 2021-07-14
2023-09-12 09:01:36

Regarding women not wanting to work:

The greatest crime of my lifetime has been destroying the single income economy. Women are expected to be mothers, home makers AND work full time? That nuts! I don't care if the feminists love the idea...the feminists hate women.

With the 1970s western economies began to evolve from serving society to preying on citizens. It's gotten progressively worse since then.
Tickerguy 198k posts, incept 2007-06-26
2023-09-12 09:05:20

@Eoinw -
Just wondering what the labour shortage situation is in the USA. North of the border it is still shocking and getting worse.

In my grocery store, every department is desperate for help. Even with $15 minimum wage, they can't find workers, nor hold on to the ones they do find. Plus the part timers get offered full time($22 per hour) very quickly now. Yet still no workers available.

There is no labor "shortage."

There IS a shortage of people willing to work a given job AT THE OFFERED WAGE.

Your government, and ours, created this and that means WE DID IT because we didn't drag them out of office BY THEIR HAIR when they started this ****, and we have also allowed them to continue it. We should have made clear that either they cut that crap out AND EJECT ALL THE FREELAODERS WHO ARE NOT CITIZENS AND HAVE NO RIGHT TO BE HERE or we will EXECUTE THEM because that path WILL lead to wild-eyed increases in crime and ultimately economic collapse. If someone is going to kill you then making clear that either they cut it out OR YOU WILL KILL THEM TO STOP IT is not only morally and ethically defensible it is a moral and ethical imperative.

In fact we let THOUSANDS of new people into the nation who have no legal right to be here every single day AND MAKE IT WORSE because that demonstrates to all those who ARE here legally that there is no reason for them to effort at all, IRRESPECTIVE OF THE WAGE.

Some will work anyway and some jobs pay enough (if you can do them) that you'll shrug, but even there what's your "hook"? That your house price doubled or tripled? You are "owed" that? From what did you do that personally made the value triple? Did you personally add two bedrooms and gold toilets or something? No. In fact a house DEPRECIATES without continual inputs because its a physical thing and left to its own devices will decay to dust, as will anything else. Entropy makes this clear and its not a suggestion.


"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."

Dingleberry 831 posts, incept 2011-11-06
2023-09-12 09:30:56

@ Eoinw,

I think we are all saying the same thing.....a toxic loop or **** stew between inflation and wages/ don't add up.

I would have thought that by now, mortgages hitting almost 8% would have utterly crashed the RE market.

It hasn't.

Why? Because housing supply is still short (obviously location dependent) AND tons of folks (including your truly) have a 2%-3%-ish mortgage rate. So I wouldn't move now even if my place was burning down, and with my ass still in it.

Few are building due at least in part to labor shortages (except I see lots of new storage facilities and going apartments---go figure). And no one is moving who doesn't have to. All cash deals are still happening, not sure how big of a piece of the market that is.

This is ****ery from all sides and and in all sorts of ways, hence why centrally planned economies don't work. We should be seeing declining household incomes & employment PLUS rising prices. I expect this to happen. It just hasn't happened yet, at least on the unemployment side of things. I suspect that the worse inflation gets...the worse the enticement to work will be. Inflation is theft by design.

A viscous circle caused by sheer lunacy, principally when adults believe in an old white dude with a beard from on high who hands out freebies.

Not Santa Claus this time....but Uncle Sam.
Aquapura 4k posts, incept 2012-04-19
2023-09-12 09:31:21

It's one thing to use credit to live beyond your means by financing hard assets like vehicles or houses. If you're using it for the necesseties like food that's a whole other story. Unfortunately you can't rely on anecdotal evidence by being out and about because everybody uses plastic for basically all purchases - aside from those using EBT. I guess the only "good" sign has been that I haven't seen anyone have their card declined recently. Kick that can a little while longer why don't we?
Workerbee23 263 posts, incept 2021-09-15
2023-09-12 09:43:52

My opinion: A great many women need to work from home to care for sick family members, not to mention the astronomical increase in autistic/disabled kids who need more intensive supervision.

I caught a blurb (ZH maybe?) about the cost of childcare costing more than private school now, another stressor on the double income group, not to mention single parents.

The return to the "mean" is going to be excruciating for most folks.

Veeger 1k posts, incept 2013-02-13
2023-09-12 09:44:02

I totally get the concept that nobody wants to work AT THE WAGES OFFERED. Fair enough.

But, if one chooses NOT to work at the proffered wage rate, they still have to eat, have a roof over their heads and keep their phone connected to the internet...

So what are they living on now? $600/wk bonuses are so 2020. Costs for sustenance and roof are up significantly. Exactly HOW are these low/entry level income workers living whereby they can still afford to be so choosey?

I remember the Diamond Princess.

Slowly at first, then all of a sudden.
Drifter 2k posts, incept 2016-02-11
2023-09-12 09:44:15

Welcome to hell-- maybe hell for some, but opportunity for others.

I remember the late Richard Russell writing how his dad bought a downtown office building for pennies on the dollar sometime after 1929. Same for cars or what have you. I think our host said as much during his biz ventures in the 90's. People that aren't leveraged have buying opps when the inevitable downturn comes.

The dangerous part of any future depression is political-- dem fascists and millions of imported socialists always double down on their insane economic fantasies.
Tickerguy 198k posts, incept 2007-06-26
2023-09-12 09:44:48

@Veeger - welcome to EBT/Section 8/etc.

And yep @Drifter.

"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."
Veeger 1k posts, incept 2013-02-13
2023-09-12 09:48:24

Yep, but EBT and Section 8 have always been with us (seemingly). Have the expenditures for said bennies skyrocketed in the last two years, like double or more? (I might have not noticed or been sleeping....)

I remember the Diamond Princess.

Slowly at first, then all of a sudden.
Tickerguy 198k posts, incept 2007-06-26
2023-09-12 09:52:48

Well @Veeger, for EBT:
FY 2019, full year: $92.5 billion
FY 2022, full year: $192.23 billion.

Next question!

"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."

Aethor 429 posts, incept 2011-11-15
2023-09-12 10:19:33

Tickerguy wrote..
to the extent the give-away is greater than the person's current earning potential

It doesn't even have to be greater, or even equal.

If what they get for nothing is, let's say, 70% of what their normal salary would have been, most welfare addicts will just do a... sort of a twisted cost-benefit analysis, and conclude that working 8 hours for those extra 30% of income (and having to do said work up to some acceptable standards, to listen to their boss and others) just doesn't make sense. (yes, I said it's twisted... but that's how most of them will think)
They will not evaluate/compare 8 hours of work against the full value of the salary, just against the difference between what they get for nothing and the salary they would get for real work.

Sitting on their rear end, not being accountable in any way, not responsible for anything, not having to learn anything - it eventually becomes like a drug, with the same addictiveness.

Of course, in the long run a normal person would conclude that this +30% income is just the beginning and they should then build up on it, advance their career etc. A normal person would think about where they want to be 10 and 20 years from now.
But people who think like that aren't those who are the problem in the first place; you will rarely find them on welfare, short of some really unfortunate events in their life.

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