Look Out Below!

Hang the black crepe. Light a candle. And kiss the dead dollars goodbye.

(Source: Getty Images)

Bill Bonnner, reckoning today from Baltimore, Maryland...

We’ve been bitten by ticks so often, over 73 years on a Maryland farm, we thought we were immune to Lyme Disease.

And maybe we are.

But there are other tick-borne bacteria. A friend warned us:

“I thought I was dying. I lost the use of my right arm. Then, I began to mix up words. Whatever it was, it had gotten into my brain. Doctors didn’t know what was going on. But I was so alarmed I researched which states had ‘right to die’ laws; I didn’t want to be a burden to my family.

“And then… a guy I knew told me he thought it sounded like Lyme Disease… so I had some additional tests. And it turned out it was not Lyme… but some other disease you get from ticks.  

“My advice… stay out of the woods in the summertime.”

In the ‘50s and ‘60s, “check yourself for ticks,” was every mother’s command when children came in from playing or working outside. But ticks weren’t so dangerous back then, just obnoxious. They bury their heads in your flesh. You don’t notice until the area begins to swell and itch. But then, they’re almost impossible to dislodge. You pull out the body, but the head stays anchored. You have to daub on alcohol, scratch and claw until you can dig the head out… usually with a big clump of your own skin still in its jaws.

But children get fewer ticks today. They no longer play outside. They need wires attached, batteries and air conditioning to have a good time.

Ticks are a non-sequitur. Our subject is money. And today, we look at how it dies.  

Down, Down, Down…  

Personal computer sales are in a downturn, says. The Wall Street Journal:

The waning appetite for personal-computer purchases is accelerating amid economic turbulence, hitting a near-decade low following two years of boom in pandemic-driven purchases.

But it’s not just computers. Here’s TradingEconomics:

Retail sales in the US unexpectedly fell 0.3% mom [month-on-month] in May of 2022, the first decline so far this year and compared to market forecasts of a 0.2% rise. It follows a downwardly revised 0.7% increase in April, as high inflation, gasoline prices and borrowing costs hurt spending on non-essential goods. Auto sales recorded the biggest decline (-4%) and sales also fell at electronics & appliance stores (-1.3%); miscellaneous store retailers (-1.1%); nonstore retailers (-1%); furniture stores (-0.9%); and health & personal care stores (-0.2%).

What’s going on? Dollars are dying.

At some level, it is simply normal and natural… a part of the life cycle. Everybody smiles when new dollars are born. Sales go up. It’s when they pass away – at the other end of the cycle – that sales go down and the wailing and gnashing of teeth begin.  

Repo Man Callin’

Stocks are down about 20% so far this year. That is the worst performance since 1970.

Bonds are down about 10% – the worst performance, well, since George Washington was president.

A 60/40 portfolio – 60% equities/ 40% treasury bonds – is down 16%... which is the worst performance ever.

“Doctor Copper,” reputed to be the “metal with a PhD. in Economics,” supposedly because of its ability to predict where an economy is headed, is down 33%.

Corn, wheat, and soybeans are down about 25%.

Even used cars are down 7% since the beginning of the year. This is despite a growing inventory of used cars. The repo men are busy. Here’s Autoblog:

Car repossessions on the rise, as average price hits $47,000

It’s hard to read automotive news without hearing stories on rising car prices and gouging car dealers. That’s one side of the story, and while it’s important, there’s a whole other thing happening on the financial side of the market that has experts worried. Vehicle repossessions are on the rise, Barron's reports, meaning many people who bought cars in the past two years are running out of ways to pay for them.

According to Kelley Blue Book, the average price of a new vehicle rose 13.5% year over year to $47,148 in May. Combined with record-high monthly payments, it’s easy to start piecing together the story. Edmunds data showed that a whopping 12.7% of new car buyers are on the hook for payments of $1,000 or more per month. 

Autos, commodities, stocks, bonds – almost everything is going down. Real estate is so ‘local,’ it’s harder to tell what is going on. But the likelihood is that it will go down with everything else.

Putting numbers to the damage, the total net worth of American households – including their holdings of stocks and bonds, and adjusted for liabilities – is about $140 trillion. If, overall, asset prices are off 15%, this represents the death of $24 trillion dollars’ worth.

Hang the black crepe. Light a candle. And kiss the dead dollars goodbye.

Regards,

Bill Bonner

Joel’s Note: Here’s an interesting chart, forwarded to us this morning by our resident macro analyst, Dan Denning. It shows the steep increase in total household assets (green bars), peaking at just over $160 trillion. Adjusted for liabilities (red bars), that number is about $20 trillion lower. Take a look…

(Source: Board of Governors of the Federal Reserve System)

Note the increase since early 2020, when the government’s giant COVID spending spree really got underway. How much of that “green growth” is real… and how much is puffed up by funny money? A 15% decline in asset prices ($24 trillion) from here would only take us half way back to pre-COVID levels.

Reckon there might be more hot air in the system? Look out below!!