June 29

A federal judge - an Obama nominee - dismissed antitrust lawsuits against Facebook. The lawsuits had been filed by the federal government and most states. Importantly the judge said that government enforcers did not plausibly allege that Facebook had monopoly power because Facebook offers its products for free and in unlimited quantities. Consumer benefit remains the red line for US antitrust law. Big technology has nothing to fear, from regulators, courts, or legislators.

Speaking on ABC’s Sunday morning show, Senator Joe Manchin – the man of the year – said he will not, I repeat not, throw caution to the wind, and support passing a $5 or $6 trillion infrastructure package through Reconciliation.   He said the country can only afford as much as $2 trillion.  Equally important he spoke the blunt truth when he added that government can help a lot of people and lift them up but people have to get up and make it for themselves.  We all have to be fighting for the greater good. 

Early Sunday morning while cycling in the toniest neighborhood of Naples, Port Royal, flanked by homes worth $20 to $100 million, I was listening to Boston’s flagship radio station WBZ.  Because of social media, all media platforms have an editorial bias.  WBZ’s editorial content is Democratic.  That’s not surprising.  Massachusetts is a deep blue state.  So I smiled as I listened to a segment on the importance of sharing household duties when couples are in a committed relationship.  The psychologist said couples are a lot happier when they both share the chores.  I thought no shit.  I grew up in a household where my father shared the chores because my mother worked nights as a registered nurse so we could go to university.  When I was parenting, I probably should have done more. Everybody could probably do more. 

Families are the foundation of community and civilization.  Civilization scales up. What is good for families is good for the nation.  People in committed relationships are happier when duties are shared.  The people of the nation are happier when everybody has skin in the game.  Let’s recognize the truth.  Too many Americans ‘don’t get up in the morning’ and do their fair share.  Well said Joe Manchin.  This nation was too much sloth and not enough grit.

I laughed out loud at the contrasting articles from two of America's most influential newspapers.  Both articles concerned the unemployment rate in Missouri.  The New York Times had a front page article saying that the state of Missouri’s early termination of supplemental federal unemployment benefits had no effect on the state unemployment rate. 

The contrasting article on the front page of the Wall Street Journal cited data that said the unemployment rate in Missouri fell sharply when supplemental federal unemployment benefits were terminated. 

The Journal article said , ‘the number of unemployment benefit recipients is falling at a faster rate in Missouri and 21 other states where enhanced and extended payments have been cancelled.’   That suggesting that ending supplemental payments pushes people to get off their backsides.  Missouri’s unemployment rate was 4.2 percent in May, well below the national average of 5.8 percent.  Interestingly the unemployment rate in New York state is 9 percent.  In New York state a household with no one working can bring home the equivalent of $100,000 in after tax income.  Why work when you can drink beer and smoke dope?

To repeat the Wall Street Journal article cites data.  The New York Times article cites anecdotes.

And we wonder why the nation is so polarised and trust in media is so low.  

MARKETS AND STOCKS

Next month I get my first Social Security check.  Boy, was that a slog. I found it annoying that I paid hundreds of thousands of dollars in capital gains taxes to the US government when I was working and living in Britain, but I was not entitled to Social Security benefits because I had not been employed in the United States.  I didn’t pay FICA.  In July I will get my first Social Security check because readers pay for my blog.  I pay taxes on the subscriptions.  So now I qualify, thank you.  I am going to use the monthly check to invest in the stock market. 

I like Disney.  There is no better reopening play than Disney.  The Wall Street Journal says people are travelling to tourist destinations.  Orlando and Anaheim where the two Disney parks are located are America’s top two tourist destinations.  The Journal reports that people are returning to the movies.  The latest Fast & Furious movie did $70 million over the weekend. 

Disney is the preeminent movie studio.  It has a long list of blockbusters lined up for people to view at the cinemas.  Disney has streaming.  We can debate whether Disney will overtake Netflix but we can’t debate that Disney has the best streaming assets.  It has in house production.  It has a proven track record.  It has a gold lined vault of content.  It has a world leading brand name.  Disney through ESPN has sports, global sports.  And Disney has news, the ABC network.  When it comes to content, Disney’s streaming service is unrivaled.  I like the stock. 

I own Nokia. I am going to buy more.  It is very high risk, but on Friday the Goldman Sachs analyst Alexander Duval upgraded the stock to a buy, he raised his price target to $6.50. 

The stock is currently trading around $5.50, the analyst sees 20 percent upside. The Goldman analyst is more bullish because the outlook for 5G infrastructure spending is improving, because Nokia is improving its wireless product offerings and because both Nokia and Ericsson are picking up share as China is shut out of 5G wireless markets in the United States and in Western Europe. 

Importantly Duval notes that Nokia has increased R&D spending by 40 percent over the last two years.  Semiconductor company Marvell Technology MRVL just said it is in the early stages of ramping up shipments to Nokia. 

I like Cleveland Cliffs. I think we will get a large physical infrastructure bill.  I know President Biden is not going to lift tariffs against steel imports.  Biden’s base is the blue collar union member.  He will protect his base.  US steel companies will enjoy strong pricing for an extended period of time.  Steel consumers will pay more than necessary but in America its votes that count, not economic efficiency.  Cleveland Cliffs has raised guidance three times in the last three months.  I am confident when it reports its earnings next month it will raise guidance again.  My target is $30, the stock is trading around $22. 

Americans are spending money on clothes.  I like the apparel retailers.  I am focusing on Gap Stores GPS, Nordstrom JWN and TJX

Wall Street is coming around to the view that inflation will indeed be transitory.  Used car prices are coming off the boil.  The well respected research firm Pantheon believes that core inflation will fall to a rate of 2.5 percent or less.

The FOMC pays a lot of attention to the Dallas Fed’s inflation measure: the trimmed mean.  The trimmed mean measure of inflation is well contained. 

ECONOMICS

I like the market.  Business investment is emerging as a powerful source of US economic growth that will sustain the economic recovery.  Business investment rose at a seasonally adjusted annual rate of 11.7 percent in the first quarter.  Business investment was led by growth in software and tech equipment spending.  See Commerce Department data.  Business investment was up double digits throughout the second half of last year.  According to the Atlanta Fed, business investment is running up double digits this quarter, Q2. 

Orders for non-defence capital goods excluding aircraft, another measure for business investment, are at the highest levels since the 1990s.  Business investment and consumer spending are driving the economy, that’s a powerful combination.  Business investment is especially important because it lifts worker productivity.  Increases in productivity enable businesses to raise wages without igniting inflation.   Strong business investment creates a positive feedback loop: higher productivity, higher wages, stronger consumer spending. 

When business has a clear road map to the future and sees opportunity for profit it will invest.   If government will just get out of the way and especially not raise taxes on investment, then the United States can enjoy unprecedented prosperity. 

SOCIOLOGY

The United States incarcerates too many people.  We are the world’s leader in jail and prison.  We have gold medal for incarceration.  We are far from being the leader in education.  The United States spends $80 billion to lock 2 million people away. For $14,000 a year, education and social welfare programs can largely enable children growing up in cultures of poverty escape the tarpits of future poverty and incarceration.  It costs on average about $35,000 a year to jail or to imprison a person.  Florida only spends about $22,000 per inmate, you can get a lot of education and support for $22,000. 

Regardless the United States wastes money by incarcerating non dangerous men and women.  There are alternatives.  Over the course of the pandemic many states released early non dangerous inmates, or states released into community control non dangerous inmates.  The federal government did the same.  

Prison does not reform.  I’ve been there, I know.  For men like me, who knew how to follow rules, to stay in their own lane, and to stay focused on the end game, coming home whole, prison is lonely and frightening, but it is mostly tedium.  Most humans are adaptable and resilient.  Most men in prison get used to it and just count the days.  But the only positive aspect of incarceration is to prevent dangerous men and women from endangering the communities of America. 

We lock up too many people.  We waste money.  Diversion programs work.  Judge Martin’s Drug Court diversion program works.  On July 6, her drug court reopens for in-person attendance, I will be there. 

Though most men and women who are involved with the criminal justice system are very wary of offers of help, I will try to do my bit.  In addition in-person attendance is good for me, it’s a reminder of my wonderful life. 

Community control with electronic monitoring is an effective program.  The recidivism rate from the Transition House in Kissimmee Florida where I was confined for about 18months was one half the rate of the Florida prison system.  Men worked in the Greater Orlando community.  They earned money, they gained self esteem, good habits were developed.  They contributed to their community.  Community custody works. 

More controversially the Biden Administration is pushing for funds to be allocated for safe addiction facilities to be created where addicts can get a fix for free in safe hygienic conditions.  That is a good idea.  If the goal is to reduce crime, and to reduce overdose deaths or the spread of HIV and hepatitis, then financing injection sites is a meritorious idea.  In addition, when an addict goes every day to an injection site, the opportunity exists for that addict to learn that society cares.  When addicts know that society cares, the chances of getting clean and sober soar.  We may not like it, but let’s focus on the end game, reducing crime and saving lives.  Cut the crap about moral judgment.  I’ll be blunt, unless you have been in the throes of addiction, you have no fucking idea what it is like.  It took a traffic accident with a fatality to save my life. I don’t want anyone else to go through that.