If marts take ‘swan’ dive
B LACK
swans.
You are going to start hearing about these birds a lot if the stock market keeps going lower because of the worldwide coronavirus scare.
No, the swans didn’t cause the virus.
The phrase “black swans” is a metaphor for an event that happens as a surprise and has a major effect.
The coronavirus, in other words, is an event — a black swan — that investors didn’t expect when they bid up stock prices to levels that reached bubblicious proportions.
The only problem with that metaphor is that black swans really aren’t all that rare in nature. And potential black swans certainly aren’t in short supply these days, with international tensions, political battles, monetary surprises and the like all waiting their turn to shock the financial markets.
Last Friday’s 600-plus point drop in the Dow Jones industrial average is one example of how badly a black swan can damage investor confidence.
The trouble is, the coronavirus shouldn’t really have surprised investors on Friday. It had been spreading for days, causing companies to cut back on their deals in the Far East and leaving doubts about the overall damaging effect on the world economy.
What helped Wall Street ignore the virus for a couple of days is the fact that end-of-the-month buying was able to push stock prices higher for a while.
Black swans like the coronavirus are the things that pop financial bubbles.
There’s one other thing going on that can damage bubbles, but there is no cute waterfowl way of describing it.
This stock market bubble has mostly been caused by the Federal Reserve’s easy monetary policy. And we have already seen how much Wall Street hates the idea that the Fed inevitably will have to raise interest rates someday.
The Fed’s balance sheet could also be making Wall Street nervous. And that could be the blackest swan of all.
According to data from Bloomberg News, the Fed’s balance sheet has been flat-to-down since the middle of December. And iff that means the
Fed is not expanding credit as much as it had been, Wall Street will continue to swan dive.
Here we go again. President Trump is promising another tax cut.
Don’t get me wrong, I love it when my taxes decline, even if by a few bucks a paycheck. But is this really the time for politicians to be giving things away, whether it’s free tuition or cost-nothing medical care or another tax cut?
The US debt level is now above $23 trillion. And it is growing at about $1 trillion a year.
By cutting taxes, the US Treasury will get less of our money (hooray!) but it will also have less to spend on things the government buys (like roads, armies and those jets that the president and Congress get around in).
And — I know this is getting cliché — but all of that debt will have to be borne by our children and grandchildren.
People who lived during World War II are known as the Greatest Generation. If we keep behaving like we have been, our generation(s) will be known as The Self ish Generation.
It’s pretty clear why Trump is going to propose cutting taxes again after doing it in 2017.
There’s an election coming up. And Trump’s Democratic challengers are offering all kinds of incentives — aka bribes — to get people’s votes.
Those promises are irresponsible with the US debt being as high as it is and going higher by more than 5 percent each year.
Most people are like me. They want more money in their pocket and they want it now.
But on sober reflection — especially when looking into their kids’ eyes — they will realize that what we are doing is wrong.
And is screwing future generations what America is really about?
We find out what effect the Christmas shopping season had on retailers at the end of the week when the Labor DepartmentD reports in January employment data. Other government numbers showed people spent a lot this Christmas. Consumers said they were going to spend generously before the holiday season and they apparently did — with growth of around 3.4 percent over 2018’s season.
Why then are retailers still shutting down stores at a rapid pace?