{"id":1807,"date":"2010-10-02T16:53:19","date_gmt":"2010-10-02T20:53:19","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=1807"},"modified":"2018-08-17T14:14:04","modified_gmt":"2018-08-17T18:14:04","slug":"where-are-we-now","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/10\/02\/where-are-we-now\/","title":{"rendered":"Where are we now?"},"content":{"rendered":"
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The last several days of last week saw a new crop of economic data (see my post below). Because of their inconclusive direction, that perrenial investment question needs to be answered yet again: where are we now?<\/span><\/div>\n

This situation has been in place since March of this year when the staring contest, or game of chicken, that I have been discussing here for some time ensued.\u00a0 If you are new to the blog, here is a summary of the most important issue and\u00a0center of gravity for the economy right now:<\/span><\/p>\n

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  • The U.S. economy is massively consumer spending driven.<\/span><\/li>\n<\/ul>\n
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    • Consumers are not really making much in the way of non-staple\u00a0purchases right now.\u00a0 Those incremental, non-essential purchases, have been the mainstay of the economy for a generation.<\/span><\/li>\n<\/ul>\n
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      • Consumers are not spending extra dollars because the high and persistent unemployment rate of between 9.5-10.0% makes them nervous.\u00a0 So consumers are hanging onto extra income and saving their money.<\/span><\/li>\n<\/ul>\n
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        • Because consumers are not spending, businesses are seeing flat to only slightly up revenues.<\/span><\/li>\n<\/ul>\n
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          • Because revenues are anemic, businesses are refusing to hire new employees.<\/span><\/li>\n<\/ul>\n
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            • So the unemployment rate remains very high.<\/span><\/li>\n<\/ul>\n
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              • High unemployment = low consumer spending.<\/span><\/li>\n<\/ul>\n
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                • Ugh!\u00a0 We are stuck in a stare down between the U.S. consumer and U.S. business.<\/span><\/li>\n<\/ul>\n

                  The only way to escape\u00a0a labyrinthine vicious circle is to\u00a0lift yourself out of the two-dimensional maze, created by opposite walls (weak consumer spending and\u00a0weak business hires), into a three-dimensional world.\u00a0 That is, something external to the maze has to reach in and lift folks out of the trap.\u00a0 I have argued that something, an externality, is the Federal Reserve or the U.S. government.<\/span><\/p>\n

                  The problem is that the Federal Reserve already has its chief economic weapon of low-interest rates set to high force velocity.\u00a0 Interest rates are already near, or at, zero percent.\u00a0 The fact is that folks are not borrowing money even at very, very low interest rates.\u00a0 So nix the Federal Reserve from the ranks of the labyrinth breakers.<\/span><\/p>\n

                  That leaves the U.S. government.\u00a0 Unfortunately, we are in the midst of an election year.\u00a0 Democrats have a strong incentive to come up with ideas that will pique the interest and capture the imagination of voters.\u00a0 Which, let’s face it, they haven’t done.\u00a0 Republicans have the incentive to maintain the current economic status quo until early November because a bad economy bodes ill for the incumbent Democrats.\u00a0 This is a log jam.<\/span><\/p>\n

                  So where are we now?\u00a0 We are stuck.\u00a0 Where will we be for the next several months?\u00a0 Probably stuck some more.\u00a0 Economic data are just not weak enough to worry about, but nor are they strong enough to get excited about and politicians are in gridlock.<\/span><\/p>\n

                  All of this likely means financial markets that largely go sideways.\u00a0 As investors, it behooves us to take this quiet time of indecision to identify truly outstanding businesses whose long-term (5-10 year) prospects are strong.\u00a0 Valuations of these sorts of businesses are currently low.\u00a0 So ironically, the lackluster economy is providing a rare opportunity for investors to conduct thorough research and buy great businesses selling at discounts.\u00a0 That’s where I’m putting my consumer dollars.<\/span><\/p>\n

                  Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

                  The last several days of last week saw a new crop of economic data (see my post below). Because of their inconclusive direction, that perrenial investment question needs to be answered yet again: where are we now? This situation has been in place since March of this year when the staring contest, or game of […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3,15],"tags":[],"class_list":["post-1807","post","type-post","status-publish","format-standard","hentry","category-the-blog","category-predictions"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/1807","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=1807"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/1807\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=1807"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=1807"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=1807"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}