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The Best of What They Said and I Read Week Ending 11/22/2020

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

 

 Barron’s – November 20, 2020 – Remember the “Fed Put?” Now There’s the Vaccine Put to Bolster Stocks – Ben Levisohn

  • “Economic data disappointed. Covid cases spiked. And the Treasury Department said it would let five of the Federal Reserve’s special lending facilities expire at year’s end. Yet the selloff never came. More good news on the vaccine front made it all tolerable for the stock market, at least for now.  Yes, the Dow Jones Industrial Average fell on the week, but just 216.33 points, or 0.7%, to 29,263.48, while the S&P 500 slipped 0.8% to 3557.54. The Nasdaq Composite, however, rose 0.2% to 11,854.97, and the Russell 2000 gained 2.4%.”
  •   “…And economic data showed clear signs of slowing this past week. Retail sales increased by just 0.3% in October from September, missing forecasts for a 0.5% rise. Jobless claims increased by 31,000 to 742,000, the first rise after five weeks of declines. The Philadelphia Fed and Empire State manufacturing indexes also disappointed. By the end of the week, JPMorgan and others had started forecasting an economic contraction in the first quarter of 2021.”
  • “…Credit the “vaccine put” for the market’s resilience this past week…The news might not have pushed the stock market higher, but it sure was a reason not to sell, similar to the knowledge investors could count on the Fed put during times of market stress. “In an uncommon manner, the vaccine announcement has given bullish investors a put option,” writes Jim Paulsen, chief investment strategist at the Leuthold Group.“Despite rising worries about the economy stalling under the weight of a horrendous winter Covid surge, the stock market may now have an option floor which simply did not exist prior to a week ago Monday.”

 

Bloomberg – November 20, 2020 – The Oldest President Ever Will Confront A Generational Wealth Gap – Ben Steverman and Alexandre Tanzi

  • “…Joe Biden wasn’t the candidate of choice for young Americans in the Democratic primaries, but they overwhelmingly supported him in the general election…Biden inherits responsibility for a group of Americans in their 20s and 30s who have been knocked down by the economic trends of the last couple of decades, including rising housing and health-care costs and record levels of student debt. Now the Covid-19 recession is hitting young Americans hardest, putting a disproportionate number of Millennials — and their younger siblings in Generation Z — out of work.  Young people weren’t catching up with older generations even before the pandemic, when the U.S. economy was strong. In fact, the wealth gap between the generations has steadily widened since the 1990s.”
  • “...A few young tech billionaires can’t make up for declining fortunes of Millennials and Gen Z. The average household headed by someone under 35 was worth $76,340 last year, the Fed’s survey shows, down from an inflation-adjusted $81,050 in 2016.  The long-term trends are even more troubling. Even as Americans collectively nearly doubled their net worth from 1989 to 2019, those under 35 lost 23%, or an average of $22,760, compared with the same age group 30 years ago.”
  •  “…One factor holding back younger generations is debt, especially the pile of student loans many have accumulated. Young people need to pay much more for college and university than previous generations did, Deutsche Bank’s Reid and Templeman point out, at the same time that “they increasingly require more education than their parents did to do the same jobs.”
  •  “…A key driver of the widening wealth gap is low interest rates, the Deutsche Bank strategists say, which boost the value of stocks and other assets that older generations own. Rising home prices have also multiplied the wealth of the old while preventing young people from buying real estate — or even from moving out of their parents’ basements.”

 

U.S. Global Investors – November 20, 2020 – Frank Holmes

  • “…Applications for U.S. state unemployment benefits rose unexpectedly for the first time in five weeks, suggesting the labor market recovery is slowly due to spiking coronavirus infections, reports Bloomberg. Claims totaled 742,000 in the week ended November 14, up 31,000 from the week prior. The U.S. now has over 11.8 million cases and reported 187,428 on Thursday November 19. The CDC has strongly advised against traveling for Thanksgiving and to only celebrate with those in your household.”
  •  “…Sales of existing homes in October soared well past expectations, rising 4.3% compared with September and 26.6% annually to a seasonally adjusted annualized rate of 6.85 million units, according to the National Association of Realtors. The annualized sales rate is the highest since February 2006.  U.S. industrial production rose in October, as output continued its slow climb back from deep declines last spring due to pandemic-related shutdowns. The Federal Reserve on Tuesday said its index of industrial production—a measure of output at factories, mines and utilities—rose a seasonally adjusted 1.1% in October, following a revised 0.4% decline in September.”

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