Introduction: 2020 – Something Big is Afoot. Are you Prepared?
I had heard this term but research this week led me to a much better understanding. It may be one of the most important forces unleashed this year. I will explain later in this blog.
Meanwhile let us look behind the headlines to understand the forces that are driving this economy and try to identify the economic trends. My mind looks for patterns which can aid investment decisions. Unpredictable, hence Black Swan, events like the Wuhan Virus do occur.
Over the next 10 weeks we are going to discuss the most important patterns/forces that are shaping economic trends and therefore the land market. There is a matrix from which to choose. As these 10 dynamic weeks unfold, I reserve the right to expand the list as needed.
The entire world but especially the financial markets are driven by algorithms, mathematical formulas that process data and predict the outcome. In mid-March, faced with the Wuhan Virus and the Chinese government refusing to share any information about their disease, the Trump Administration made the right decision to shut down the booming USA economy in an effort to (1) minimize the death of Americans and (2) give our medical community the opportunity to learn about the disease in order to get prepared. That mission has been accomplished.
Because of the abrupt stop of our economy, the financial results of the 2020 first quarter (January to March) have no relationship to the second quarter financial results. Hence, since mid-March the financial markets’ algorithms have had little data. So, trading/pricing has been based on guesstimates, hopes, and personal opinions. Headlines have driven the markets daily.
The second quarter (April – June) financial results of publicly traded companies will be reported starting next week. This data will reflect the effects of shutting down the American economy, the phased release by governors and mayors, and the impact of the chaos in our cities. UGLY!
The Trump Administration has done a remarkable job, far superior to any previous administration, in coordinating the power of the Federal government (PPP, CARES Act), The Federal Reserve (Quantitative Easing, bond purchasing, direct loans, etc.), and using the War Power Act to produce needed supplies here in the USA since China would not provide them. The good news is we now realize just how dependent we are on a totally untrustworthy China.
Since the May easing of government-imposed shelter in place restrictions, the USA economy has begun a robust economic recovery. That recovery is actually being impeded by the increased unemployment payments. We taxpayers are paying folks not to work. Quite stupid, actually.
Ignore the media that is focused on defunding police to “improve safety” and the destruction of statues by Protestors/Rioters/Vandals (PRVs) to erase history. One of the most important forces in the USA economy was reported last week – the total amount of cash in the USA sitting on the sidelines is $4.6 Trillion. That is $800 Billion MORE than in the middle of The Great Recession which peaked at $3.8 Trillion in cash. Our Gross Domestic Product (GDP) is approximately $20 Trillion. That comparison aids understanding the magnitude of the cash.
The significance of that amount of cash is (1) it is a measurement of fear, and (2) it is available to be invested. Some of the fear is caution on the part of Chief Financial Officers (CFO) hoarding cash to fund their operations in these uncertain times. The 2017 Tax Act has allowed USA companies to bring back their cash to the USA. Thank you, Lord, the Republican majority in Congress in 2017, and Trump! Because that repatriation of cash is happening, many of our large companies are getting financially fortified without bailouts from the taxpayer.
But a significant part is cash being held by individual investors, both a Blessing and a Curse. The Blessing is that investors have huge sums of money to invest, a critical ingredient to capitalism. The Curse is (1) they are afraid, so they are holding cash even though they are receiving virtually nothing in return because interest rates are so low, and (2) when that amount of money does move into the economy a surge would create bubbles. Bubbles burst, creating a painful cycle.
In these uncertain times, what is the best investment strategy? Let us frame the decision tree this way:
- This month, the financial results for the second quarter will be reported.
- The extra unemployment payments expire the end of July, impacting spending in August.
- Many small companies have been wiped out retarding recovery – 50% of restaurants, 33% of small retailers, plus other businesses – have you noticed the bankruptcies?
- There are CARES Act provisions that expire in October. Big layoffs will result.
- The most likely scenario is that the full recovery of the USA economy will be one year after the citizens of the USA have been vaccinated, so full recovery in spring 2022.
Until then interest rates will remain historically low. As that mountain of cash moves into investments, many assets will ascend into bubble values. Inflation will impact the economy so “hard assets” like land will benefit. Not all tracts of land will benefit equally.
The wild card, political risk, is a part of the valuation algorithm. The Democratic Party is encouraging chaos in cities with “rule by mobs” such as Movement 4 Black Lives (M4BL). Did you see the pictures from Portland, Oregon? Neutered cops, surging crime. Is this a civil war?
One of my wife’s women’s club members forwarded a video link of her relative, a pastor, sharing three dreams. The first dream occurred in January and foretold a crisis in the USA beginning in mid-March which he now realizes was the Wuhan Virus. The recent second dream predicts horrendous social turmoil beginning in September. The third dream revealed the USA in November under the control of the Chinese military enduring economic chaos. What I found most remarkable was that I was unwilling to state those are unbelievable. This is 2020.
Consider these recent events:
- July 1, 2020, the Richmond mayor removed four Confederate statues from Monument Avenue destroying an internationally recognized historic area and those home values. The CEO of the Richmond Association of REALTORS (RAR) announced she was going to raise the $1.9 Million cost of removing the statues using the Maggie Walker Land Trust which had been created to encourage affordable housing. Never waste a crisis?
- The judge that had issued the injunction against the removal of the Lee statue became the fifth judge in the city to recuse himself. Intimidation? Was it physical or political?
Now “Karen”. Several weeks ago, a white woman by the name of Karen called the NYC police complaining she was being harassed by a black male in Central Park. M4BL, which controls the phrase “Black Lives matter” (BLM) have now added to their repertoire of hatred (1) eliminating married, white, suburban women whom they call “Karens”. Their other objectives are (2) Marxism (communism), (3) the destruction of the traditional family (they believe “fatherhood” should be eliminated), and (4) their own country in the USA (El Grande CHOP?) with their own armed “Protection Patrols”.
So, the CEO (per M4BL a “Karen”) of a REALTOR organization which exists because of the ownership of private real property, is supporting M4BL, which is against private property rights. Was she so consumed with “Never Waste a Crisis” that she did not research her compatriot’s “Manifesto”? The real question, How important will “Karen” become when married, suburban, women realize they are now targets of M4BL, a Democratic party compatriot?
Formerly, the USA was a Christian nation of laws. Both people and businesses flourish in that environment because everyone knows the rules by which they need to play. The importance of ALL HISTORY is (1) we can celebrate that superb decisions are made collectively by imperfect people over time and (2) we can measure our direction and progress. The fact is, God gave us “Free Will”, a blessing which leads to human error. No individual is perfect. There is always room for improvement. “Equal Opportunity” actually means “Personal Responsibility”.
The stark and sinister difference between the 1960 Civil Rights movement and M4BL is the total absence of Christian values or even Christian leaders in M4BL. Marxism considers Christianity to be void, the godless state is most important. Marxism/Socialism/Communism always fails. But Democrats “Never waste a crisis to build their political base”. Their continued chaos will have an enormous NEGATIVE effect on our economy.
“As He was saying these things, many believed in Him”
(John 8:30 New Revised Standard Version, Oxford University Press)
Restated by Pastor Jesse Reddoch: “Speaking truth increases faith”.
Capitalism builds wealth, socialism consumes it in self destruction. I serve an awesome God. Stay healthy,