Coming Off the COVID Leash…

Mike Williams | 19th October 2020
Categories
Letter from America

In the early 1980s, the Baby Boomer age cohort came into a particularly challenging jobs market.  

Unemployment was at 10% plus. 

The response?  

There was an explosion in small business formations.

And if we fast forward to today, well, it’s happening again:

Sometimes it the crucial little piece of data in amongst all the mayhem that goes overlooked and becomes the major domino of the times. 

Have a look again at the three snapshots above. Note the massive response to the setbacks:

  • Over 1.5 million plus US business applications in the last 90 days alone. 
  • A full one million more business closing due to the COVID shutdown response than the number being bandied about. 

The media will focus on the 500,000 closed businesses.

We should be focusing on the 1.5 million openings.

By the way - that retail sales level is now (in dollar terms) at all-time highs:

The chart above shows you that retail sales took a mere five months to reach new highs.

It took 40 months after the Great Financial Crisis ended in 2009. 

The consumers in America have collectively put aside nearly $19 Trillion for a "rainy decade" ahead.  

Wait until we collectively decide to be, say, $14 Trillion worth of afraid instead of $19 Trillion.

Read: "Boom!" 

You know what Americans do when they get stressed?  

They go shopping.  

Expect records to be shattered in this upcoming Holiday Shopping Season.

High Level Review

We have now, and will continue to be, inundated with all the bad stuff.

The strong-minded, disciplined, and patient investor will keep his or her eyes on the horizon, not the daily news.

And the good stuff includes:

  • ISM’s are solid 
  • Manufacturing is solid 
  • Supply chains are coming back to the US 
  • Business openings are exploding
  • Small business optimism and forward-looking hiring plans are strong 
  • Auto production has fully recovered
  • Tech is washing over every sector of the market 
  • Earnings and Margins are set to shock people a year or so down the road 
  • Massive cash levels will serve as future fuel at higher prices 
  • Generation Y is just beginning to buy homes - with 20 more years of that to go, and  
  • Look out for increasing family formations and marriages as the next stage

The US economy, thanks to all of us collectively never quitting, is nearly completely off the COVID leash.