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Here we go again?

The last time the S&P gained 50% in 100 days was on the bounce off the first leg of the great Depression. In the 90 years since, we've never repeated that trick – until now, when the S&P has popped 50% in 100 days. You'll notice we flattened out after that in 1933 and that is despite MASSIVE STIMULUS at the time. In fact, we didn't really get the economy going again until World War II broke out and, between the military service and the war manufacturing, the US went to full employment – so much so that they even let the women work!

The Depression was persistent because it's all about jobs and jobs are all about Consumer Spending and we'll be getting our Retail Sales Report at 8:30 this morning, followed by Consumer Sentiment at 10 am. Just like the Trump Depression, the Great Depression began when there was very low unemployment – just 2.2% in 1929. Then the market crashed, like it did in March, and then we had a bit of a recovery but then we completely collapsed as job losses mounted and businesses could not get back on track.


I know it's hip to be complacent and pretend everything is awesome, etc. because who wants to face the reality of our situation and, believe me, I take no pleasure in being Cassandra for the group but the sky IS falling and ignoring it won't make it go away. These are not abstract things, this is stuff that's right in front of our faces that people are simply brushing off – mostly because we have a Government that encourages you to brush it off.

Unemployment Aug 14 2020

While we are off our (mostly) April highs, we still have MASSIVE unemployment and we don't know what the effect of Lockdown II is going to be but, since this report was filed, there have been 11 major Retail Bankruptcies in two months, after 12 in March, April and May:

Tailored Brands (Aug. 2), Lord & Taylor (Aug. 2), Ascena (July 23), The Paper Store (July 14), RTW Retailwinds (July 13), Muji USA (July 10), Sur La Table (July 8), Brooks Brothers (July 8), G-Star Raw (July 3), Lucky Brand (July 3), GNC (June 23)

And Brooks Brothers made it through the Great Depression!


8:30 Update: Retail sales were not terrible, they are up 1.2% from last month but that's below the 2% growth forecast and still far below average. Bottom line is we're not making up those lost sales and growth (year/year) is still very weak. When you drop 50% and then you gain 50%, you are still at 75% of where you were.

The S&P 500 dropped 33%, to 66% and now we've gained 50% – to take us back to where we were. Let's not get too excited about that. Another statistic we got this morning was Unit Labor Costs, an indication of productivity and those are up 5.1%, which is not good for Corporations. Labor Productivity decreased by 0.9% and last Q has been revised down to -2.6% so I guess we're not quite as productive working from home.


Output dropped 6.5% and hours worked decreased 5.6%, the worst drop since Q1 of 2009. Overall, this is not terrible considering the circumstances but, if circumstances don't change – the economy can't take much more of this.

Have a great weekend,

- Phil