Weekly Round Up

October 12, 2021 | Matt Barasch


Chart of the Week (COW)

While the economic recovery began in the middle of last year, it has been an uneven recovery that has been impacted by repeated waves of COVID, supply chain problems and changing consumer behavior. Let’s look at this week’s COW and then comment:

With the latest and, hopefully, final major wave of COVID now in retreat, businesses cite labour and the shortage of skilled and unskilled workers as the biggest hindrance to a recovery. We need a plan for a post-COVID world and we fear that policymakers have yet to properly realize this and put plans in place that will get people back to work.

COVID-19 Update

Globally, cases continue to come down:

The number to watch is ~350k daily cases, which is where cases have bottomed in the two prior large waves over the past year. We are currently at ~450k daily cases, so we will be watching this threshold with interest in the coming weeks as it could help to confirm what is now a growing consensus that Delta may be the final major wave of COVID.

Market Update

As we highlighted last week, there were a number of issues weighing on the market with the U.S. debt ceiling (our personal favorite for the absolute dumbest U.S. law, which is saying something) one of the bigger ones. Congress, which is always good for a crisis of its own design, managed to cobble together the votes needed to push the debt ceiling back a few months (to December or January) and lo and behold the stock market reacted with a robust rally.

One of the things that struck us about the debt ceiling agreement was that it called for a ~$400bn increase in the ceiling. As recently as 2016, this would have “bought” the U.S. roughly 12-months, as the annual deficit was ~$400bn. Now, $400bn on an annual basis may sound like a lot, but when you consider the U.S. economy at the time was ~$20tn, it amounts to ~2% of the economy, which is not ideal, but is certainly manageable.

However, $400bn now only buys the U.S. ~2-3 months of relief as the annual deficit is approaching $3 trillion. As a fun exercise, we give you the following:

How long is 300,000 seconds? If you answered about 3-days, you would be correct.

Okay, how long is 3 million seconds? If you answered about 35-days, you would be correct.

Alright, now how long is 3 billion seconds? Now, the knee-jerk reaction might be to look at 3-million seconds, which was about 35-days and use some multiple of that. The reality is that 3 billion seconds is about 95-years.

Finally, and this one is a doozie, how long is 3 trillion seconds or put another way, if you counted one dollar of the U.S. budget deficit every second, how long would it take you to get to the full amount? The answer is roughly 95 thousand years. To put this in perspective, 95,000-years ago, the earth was in the midst of its last great Ice Age when toxodons walked the earth and Homo Sapiens and Neanderthals still faced off in an annual winner take all football game.