Juggling Dynamite

Friday, it was news that US consumer confidence fell 13% from July into August to 70.2 (vs 81.3 expected), the lowest since 2011.

Yesterday, it was news that US retail sales for July—purchases at stores, restaurants and online—fell 1.1% compared with June.  Today, we learn that US mortgage applications for new homes fell for the second consecutive week (19% lower than a year ago) and that US housing starts fell 7% versus the 2.8% increase the consensus had forecast.

As shown on the left in red since 1980, the problem is the most unaffordable prices for goods and housing (relative to income) in at least 41 years.

With asset prices among the most egregious in history, capital allocators should suffer similar sticker shock.   However, as shown below in black since 2008, ‘investor sentiment’ remains freakishly untethered from economic prospects and the consumer sentiment (in blue) that drives them.

As macro data and expectations have rolled over again in the past 5 months (light blue on the lower left since 2008), asset managers remain overweight equities (dark blue) where they collect the richest underwriting and management fees.

As in 2000, 2009 and 2020, they will hold as asset prices tank until marginal calls and customer redemptions force them to sell near cycle lows once more.  Rinse and repeat.  At that point, cash will be king and buyers rewarded.

This worthwhile discussion considers some of the lasting health impacts of COVID-19 and its potential economic implications.

SPECIAL WEBCAST | The Long Shadow of Long Covid: An Economic Threat https://t.co/vdxWLi2tCA via @hedgeye

— Keith McCullough (@KeithMcCullough) August 18, 2021

Here is a link to the slides.

Also, see A pandemic after the pandemic:   insurers brace for disability claims ‘deluge’, from mental, physical strain of crisis.

Powered by electricity (which can now be derived cheaply from solar and wind) this is what productivity-enhancing innovation looks like.
AQUAER water condenser and engineer Enrique Veiga explained his invention this month in a Reuters video here:

“What our machine does is to replicate the cycle of water. It uses the air in the environment, our machine’s main feature is that it can work in the desert, with temperatures of 40 degrees Celsius and above with a relative humidity of 10%, 15%.”

A small machine can produce 50-75 litres a day.

The bigger versions can produce up to 5,000 litres a day.

Our goal is to help, our goal is to reach those refugee camps where there is no water to drink and give those people the chance to drink. Our aspiration is not only to produce an effective working machine but to make it useful and above all make it useful to those people that we see in documentaries walking kilometres and kilometres to get water and dig wells.”