Friday April 24 2020
Despite a recent runup in stock prices for large, mainly tech-based stocks, there is continued carnage beneath the surface of indices. The five largest stocks make up over 20 percent of the S&P, the highest level in decades, and their combined worth is equal to the bottom 350 companies in the S&P combined. While the S&P is down just under 15 percent for the year, the equal-weighted index is down almost 25 percent, and the small-cap index is down over 35 percent.
Narrowing breadth occasions the end of a bull market run-up in stock prices. Fewer and fewer stocks participate in what is left of the rally. But the weighted presence of these stocks among various indexes makes it appear the market is in great shape. Now the FANG stocks are the 20% masking a greater weakness.
Only 18% of the 500 S & stocks are over their 150 day moving average.
Durable goods orders reported this morning dropped 14%. That is the second biggest drop ever. Oil prices actually went negative Monday on the nearby contract. Speculators were paying a third party to take a barrel of oil off their hands. Now that is deflation. Readers can learn more at www.deflation.com.
All of this points up just how interdependent we have become as a society. Three generations back, my grandfather lived a pretty independent (okay frugal and bare bones but..) life. He had chickens in the back yard and grew his own garden. Others in his small town had a few cows or goats to further supplement the dining room table. One heard phrases like ‘store bought’ to indicate goods made by a third party. Such store bought goods were seen as luxuries. Every Mom it seemed owned a Singer Sewing Machine. A mark of an independent woman was that ‘she made her own clothes.’
Now that independence in large cities is gone. Let the hotel industry close and the ripple effect across town never stops. Re-opening the auto plant is problematic until the dealers can sell what is on the lot. Here in San Antonio 71,000 are now jobless.
I read calls for more education. Well, what is it that we have been educating people to do? Does it really require 12 years of public school to become a waiter or hotel maid? Rather, this number of people so quickly dislodged from a paycheck should call for a re-examination of why we lack plumbers, carpenters, and other worthwhile vocations.
For now the energy industry cannot make money on $17 oil. It took the airlines 6 years after 2009 to regain 2005 level of traffic.. Don’t expect a quick V Style recovery.
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