The Long Term Investor

This is GREAT advice for any investor.

Investing Lessons From the Year Since 2020’s Vote
With midterm elections looming, stay above the political fray.

https://www.fisherinvestments.com/e...esting-lessons-from-the-year-since-2020s-vote

(BOLD is my opinion OR what I consider important content)

"Editors’ Note: MarketMinder favors no politician nor any political party, assessing developments and trends solely for their potential market and economic impacts."

"This week marked a year from the contentious 2020 US presidential election. Along the course, we have endured 12 months of hot, shrill rhetoric over contested outcomes and recounts, twin Georgia Senate runoff votes, a riot at the Capitol, lots and lots of talk about big legislation and so much more. Regardless of which side of the aisle you favor, there was something to trigger your emotions. Now 2022’s midterms are coming into focus, which could roil emotions again. In our view, that makes now an apropos time to remember: Mixing political bias into your investment strategy is dangerous.

Last year at this time, many on America’s political right warned President Joe Biden’s winning would spell big trouble for stocks. They doubled down on this argument when it became clear both Georgia Senate seats would be up for grabs on January 5. That raised the possibility of the Democratic Party controlling the White House and both chambers of Congress, which many presumed meant huge legislative activity was coming, drawing some investors’ hope—and many others’ ire.

Flash forward to now. Biden won the election. Both Georgia Senate seats went to the Democratic candidates, too. But did this spell trouble for stocks? As Exhibit 1 shows, the answer is a resounding “no”—US stocks have posted their best post-election return since good daily data start in 1928.

Exhibit 1: S&P 500 Returns One Year After Presidential Elections


Source: FactSet, as of 11/4/2021. S&P 500 price returns one year after Election Day of president indicated, 1928 – 2021.

Now, those on America’s political left may see this—and the collection of names toward the top of this bar graph—as evidence suggesting Democratic presidents are “better for stocks.” We often see this very theory trotted out during election years, based on averages or other selective views of market history. But ascribing returns directly to a president—any president—in this manner is fallacious, in our view. Last year illustrates it perfectly.

For one, slicing market returns like this obscures the overall cycle—and could lead to errant conclusions. The 38% return a year from Biden’s election as president may seem huge, and it is big. However, in broader context, it doesn’t seem so remarkable. The year happened to fall in the wake of history’s fastest-ever bear market last spring—and among the fastest rebounds on record. Consider: Between March 23, 2020’s low and November 2, 2020—the day before election day—the S&P 500’s annualized return was 89.4%.[ii] The biggest-ever post-election 12-month return represents a marked slowdown from the trend immediately preceding it.

But at a broader level, because stocks move most on the gap between reality and expectations, widespread fear and relief can greatly influence stocks’ direction. Entering this year, many, many investors feared a Democrat-controlled government would spell trouble for stocks. But the Biden administration has proven unable to do much due to intraparty squabbling. For those who feared sweeping legislation or action earlier this year, that is likely a big relief—conscious or unconscious. Ditto for his approval rating’s drop from 57% in late April to 42% in mid-October and the GOP’s relatively strong showing in this week’s gubernatorial elections.[iii]

This all fits with our long-held view of how sentiment can sway stocks in election and inaugural years—the perverse inverse. Counterintuitively to many, inaugural year returns under Democratic presidents top GOP presidents’. Why? Fear and relief. Democrats seeking the White House often campaign on higher taxes, regulation and other measures many investors see as “anti-business.” Republicans normally campaign on the opposite. So when Democratic presidents take office, fears over what they may do run wild early in the inaugural year. However, most presidents (whether by choice or not) moderate once in office. (The slim margins in Congress right now seem to be forcing that, at least in part.) As this inaugural year reality unfolds, it usually fails to live up to pre-existing fears already baked into stock prices. Hence—consciously or unconsciously—relief takes hold. The positive surprise helps lift sentiment, driving bigger returns.

A year from now, we will be talking about a different election—the 2022 midterms, which are already drawing a ton of attention. These midterms will have their own effect on stocks, which we are sure to discuss in the coming months. But we think you can also book this: Pundits will overrate personalities and rhetoric, with many shrill claims about what this-or-that outcome means for your money. Tune it all down. From a market perspective, viewing politics correctly requires staying above the biased fray, in our view—separating talk from probable outcomes.

MY COMMENT

YES......get down into the MUD and into the FRAY all you like in your everyday life. BUT.....in your investing life.......STAY OUT OF POLITICS. The emotion and drama of politics is KRYPTONITE for any investor. This "stuff" is the ultimate short term distraction to an investor......it is POISON.

The KEY in any type of investing.....including.....long term investing is RATIONAL and REALISTIC thinking. You can NOT be jumping into and out of investments according to politics. ANY long term investor is going to invest for 20-50 years or more. Over that time there will be many political events and changes. Some you will like, some you will love, some you will not like, some you will hate. You will just kill your returns if you try to combine market timing and politics.

 

I am distracted today. I have an auction running on another computer. At the rate it is going I should see the lot that I am interested in come up in about an hour. The last few items that I have tried to buy at auction.....I got outbid quickly. I am hoping that the item today breaks the recent auction jinx.

I am trying to distract myself by doing some posting.

 

So....speaking of posting....here is a little article that is NOT focused on the short term events of today.

The Same Stories, Again and Again

https://www.collaborativefund.com/blog/the-same-stories-again-and-again/

(BOLD is my opinion OR what I consider important content)

"During the depths of the Great Depression in 1932 an Ohio lawyer named Benjamin Roth wrote in his diary:

People think if more money were printed business would be better. This is a false and vicious theory … I am personally very much concerned with the question of inflation and it seems to me there is a grave possibility it will come unless the government at once balances its budget. With an election coming this seems out of the question.

A few months later, he wrote:

There is also considerable discussion about the new science of “technography” which holds that new machinery has replaced many men in industry who will never find a job again.

When I first read those a decade ago I couldn’t believe how similar they were to what people said after the 2008 recession. Now they’re relevant again today. You can copy and paste those paragraphs into any current newspaper and they’d fit right in. Some things never change.

Roth felt similarly.

When writing his Great Depression diary he was struck by how similar the 1930s were to previous big recessions. “I have done considerable reading about the depressions of 1837 and 1873,” he wrote, “and I am amazed at the similarity to conditions today.”

A year later he researched the Depression of 1893 and wrote, “I am again struck by the similarity.” The way people responded to decline and how politicians behaved and how greed and fear controlled investment decisions seemed identical. Some things never change.

Anthropologist Franz Boas says, “Every culture has its own genius and should be judged in its own terms.”

Sure, but every culture and era also share universal characteristics that repeat again and again. The same attitudes, the same flaws, the same stories that show up all over the place. They’re reflections of how people’s heads work no matter where they live or when they were born.

Those common behaviors are what I find the most interesting from history because they’re not just trivia – you can be nearly assured that they’ll eventually impact your own life.

Social sciences get a bad rap because so many insights are hard or impossible to reproduce. I think the only solution is paying special attention to the few behaviors that have repeated themselves throughout history.

A few that stick out from economics:

1. No one knows how they’ll respond to risk and setback until they’re in the moment of terror.

Varlam Shalamov was a poet who spent 15 years imprisoned in the Gulag. He once wrote how quickly normal people can crack under stress and uncertainty. Take a good, honest, loving person and strip them of basic necessities and you’ll soon get an unrecognizable monster who’ll do anything to survive. Under high stress, “A man becomes a beast in three weeks,” Shalamov wrote.

That, he said, is why history is full of so many unspeakable acts. It doesn’t take much stress for people to abandon their beliefs and say, “Fine, let’s go this other way now.” So you never know what people are capable of believing or doing until they’re backed in a corner.

The stakes are lower and outcomes far different, but a similar thing happens when people find themselves trapped in economic stress and uncertainty. There’s a long history of countries embracing policies they would have found unthinkable until they’re hit with an economic shock, when fringe ideas are quickly embraced.

Social Security was roundly rejected for decades, with straggling supporters arrested in the U.S. Capitol during one push in the 1920s. Then the Great Depression hit, and boom… practically overnight it was widely popular. The Social Security Act of 1935 passed 372 to 33 in the House and 77 to 6 in the Senate.

Same with 94% tax rates after World War II. Low taxes were the most popular economic platform of the 1920s, and anyone suggesting a hike was pushed aside. Then everything broke with a dual Depression and war. In 1943 Franklin Roosevelt said: “I do not think that any American citizen should have a net income in excess of $25,000 per year after payment of taxes [roughly $375,000 adjusted for inflation].” He was reelected in a landslide the next year.

Same with the Regan revolution. Almost 80% of Americans had high trust in the government in 1964. Then the 1970s happened. George Packer recently wrote:

After years of high inflation with high unemployment, gas shortages, chaos in liberal cities, and epic government corruption and incompetence, by 1980 a large audience of Americans was ready to listen when Milton and Rose Friedman blamed the country’s decline on business regulations and other government interventions in the market.

Same with stimulus packages of the last 18 months. Deficit reduction was such a big topic in the 2010s, even among Democrats. Then Covid hit, and the $2.2 trillion CARES Act passed the senate 96-0.

Time and again we see that preferences are fickle, and views that a big chunk of society would have thought unthinkable can be quickly embraced when the economy changes direction. So we really have no idea what policies we’ll be pushing for in, say, five or ten years. Hard times make people do and think things they’d never imagine when things are calm.

Your personal views fall for the same trap. In investing, saying “I will be greedy when others are fearful” is easier said than done, because people underestimate how much their views and goals can change when markets break.

Bill Seidman, who used to run the FDIC, once said, “You never know what the American public is going to do, but you know that they will do it all at once.” The same story, again and again.

2. Declines occur because many people’s entire goal is to become so successful that they can relax, and relaxing leads to complacency that breeds decline.

A recent profile of Eliud Kipchoge, the best marathon runner in the world, writes:

He has a thing about celebrating, Kipchoge. Sees it as something sinister, something dangerous, a self-indulgent act that might derail his mindset, make him think, somewhere in his subconscious, that he has arrived, the inference being he has nowhere left to go.

“I’m a believer that if you climb to one branch,” he says, “then you reach for the next branch.”

It’s a great story because it’s so rare. And it’s rare because it’s most people’s definition of career hell.

“What’s the point of working hard if you’re never going to celebrate, if there’s never any reward?” is such a reasonable philosophy, and I think it’s what most people embrace. Their career goal is to work hard so they can stop working hard one day.

Whole industries fall into this bucket. In a story a few years ago about why so many Chinese restaurants are shutting down, The New York Times wrote: “These people came to cook so their children wouldn’t have to, and now their children don’t have to.” The whole purpose of opening the restaurant was to one day be able to shut it down.

I can admire that ethos, especially at the individual level. But it’s easy to see what happens when it’s simultaneously embraced by enough people, across industries, who decide it’s time to relax and celebrate after years of hard work.

The 1930s book Since Yesterday writes about the conditions that sparked the gambling mentality of the 1920s. Getting through World War I required so much sacrifice that when the skies cleared the whole nation felt obligated to party:

The temper of the aftermath of war was at last giving way to the temper of peace.

Like an overworked businessman beginning his vacation, the country had had to go through a period of restlessness and irritability, but was finally learning how to relax and amuse itself once more. A sense of disillusionment remained; like the suddenly liberated vacationist, the country felt that it ought to be enjoying itself more than it was, and that life was futile and nothing mattered much. But in the meantime it might as well play – following the crowd, take up the new toys that were amusing the crowd, go in for the new fads, savor the amusing scandals and trivialities of life. By 1921 the new toys and fads and scandals were forthcoming, and the country seized upon them feverishly.

Bubble in the Sun, a book on the Florida real estate bubble of the 1920s, tells the same story:

The nation, having fought and won a traumatic war, was eager to have some fun, and an exotic new American Riviera beckoned … As the new live-in-the-moment spirit took hold, a natural response to the recent dour war years, Americans began to spend and borrow more freely than ever before.

By 1927 this mentality led to the era’s popular song:

Blue skies smiling at me

Nothing but blue skies do I see

Blue birds singing a song

Nothing but blue skies from now on

Never saw the sun shining so bright

Never saw things going so right

Hard times justifiably – completely reasonably – made people want to relax, and relaxation compounded into complacency. From one extreme to the next.

In hindsight we view bubbles as periods when people lose their minds, tempted with dumb decisions and overconfidence. That’s partly true. But there’s another cause: People who spend their whole careers working hard amid uncertainty view the new era of prosperity as their deserved reward, the entire point of putting in years of long hours to begin with. So rather than a warning sign, the bubble is seen as crossing the finish line and being patted on the back after a long journey. George W. Bush portrayed the booming housing market as a sign the middle class could finally enjoy dignified housing stability. Maybe the same thing is happening now, with a generation who graduated into a broken economy buried in student loans and priced out of the housing market view the gains from meme stocks as their rightful compensation.

The same thing happens at individual companies. Becoming successful requires years of long, arduous work, away from your family, with everything on the line. It’s understandable that once a certain level of success is achieved some leaders feel justified to slow down, pull back, and let their guard down – especially when they’re being told how special they are and congratulated for their success. Scott Galloway says “If you tell a 30-year-old man he is Jesus Christ, he is inclined to believe you.”

When most people require a break from arduous and uncertain times, we should not be surprised when once a decade or so everyone casts prudence aside. We are not like Kipchoge. We like to celebrate, regardless of its eventual cost. The same story, again and again.

3. Innovation is hard to predict and easy to underestimate because so much occurs by accident, when several boring discoveries compound into something extraordinary.

A common story through history is that past innovation was magnificent, but future innovation must be limited because we’ve picked all the low-hanging fruit.

On January 12th, 1908, the Washington Post ran a full-page spread called “America’s Thinking Men Forecast the Wonders of the Future.”


Among the “thinking men” buried in the fine print was Thomas Edison.

Edison had already changed the world at this point, becoming the Steve Jobs of his time.

The Post editors asked: “Is the age of invention passing?”

Edison’s answer was predictable:

“Passing?” he repeated, in apparent astonishment that such a question should be asked.


“Why, it hasn’t started yet. That ought to answer your question. Do you want anything else?”

“You believe, then, that the next 50 years will see as great a mechanical and scientific development as the past half century?” the Post asked Edison.

“Greater. Much greater,” he replied.

“Along what lines do you expect this development?” they asked him.

“Along all lines.”

This wasn’t just blind optimism. Edison was successful because he understood the process of scientific discovery. Big innovations don’t come at once, but rather are built up slowly when several small innovations are combined over time. Edison wasn’t a grand planner. He was a prolific tinkerer, combining parts in ways he didn’t quite understand, confident that little discoveries along the way would be combined and leveraged into more meaningful inventions.

Edison, for example, did not invent the first lightbulb; he just greatly improved upon what others had already built. In 1802 – three-quarters of a century before Edison’s lightbulb – a British inventor named Humphry Davy created an eclectic light called an arc lamp, using charcoal roads as a filament. It worked like Edison’s lightbulb, but it was impractically bright – you’d nearly go blind looking at it – and could only stay lit for a few moments before burning out, so it was rarely used. Edison’s contribution was moderating the bulb’s brightness and longevity. That was an enormous breakthrough. But it was built on the back of dozens of previous breakthroughs, none of which seemed meaningful in their own right.

That was why Edison was so optimistic about innovation.

He explained:

You can never tell what apparently small discovery will lead to. Somebody discovers something and immediately a host of experimenters and inventors are playing all the variations upon it.

He gave some examples:

Take Faraday’s experiments with copper disks. Looked like a scientific plaything, didn’t it? Well, it eventually gave us the trolly car. Or take Crooke’s tubes; looked like an academic discovery, but we got the X-ray from it. A whole host of experimenters are at work today; what great things their discoveries will lead to, no one can foretell.

“You’re asking if the age of invention is over?” Edison asked. “Why, we don’t know anything yet.”

This, of course, is exactly what happened.

When the airplane came into practical use in the early 1900s, one of the first tasks was trying to foresee what benefits would come from it. A few obvious ones were mail delivery and sky racing.

No one predicted nuclear power plants. But they wouldn’t have been possible without the plane. Without the plane we wouldn’t have had the aerial bomb. Without the aerial bomb we wouldn’t have had the nuclear bomb. And without the nuclear bomb we wouldn’t have discovered the peaceful use of nuclear power.

Same thing today. Google Maps, TurboTax, and Instagram wouldn’t be possible without ARPANET, a 1960s Department of Defense project linking computers to manage Cold War secrets that became the foundation for the Internet. That’s how you go from the threat of nuclear war to filing your taxes from your couch – a link that was unthinkable 50 years ago, but there it is. Facebook began as a way for college students to share pictures of their drunk weekends and within a decade was the most powerful lever in global politics. Again, it’s just hard to connect those dots with foresight. And that’s why all innovation is hard to predict and easy to underestimate. The path from A to Z can be so complex and end up at such a strange point that it’s nearly impossible to look at today’s tools and extrapolate what they might become.

There’s a theory in evolutionary biology called Fisher’s Fundamental Theorem of Natural Selection. It’s the idea that variance equals strength, because the more diverse a population is the more chances it has to come up with new traits that can be selected for. No one can know what traits will be useful; that’s not how evolution works. But if you create a lot of traits, the useful one – whatever it is – will be in there somewhere.

It’s the same thing with innovation. At any given moment it’s easy to look around at what startups are building or what scientists are discovering and think that what we’re working on is maybe neat – at best – but pales in comparison to what we did yesterday. Since we never know how multiple innovations will collide, the path of least resistance is to conclude that our best days are behind us while ignoring the potential of what we’re working on.

On January 12th, 1908 – the same day the Post ran their column with Edison – the first long-distance wireless message was sent in France.

No one could foresee the inventions it eventually seeded, including helping you read this article 113 years later."

MY COMMENT

A bit of....food for thought......and.....a bit of a history lesson for investors. We ALL tend to focus on our own life and the time in which we live. History has some good and valuable lessons for life and investing......if we have the self awareness and intelligence to see and appreciate them.

 

HERE is the economic news of the day that no one will care about.

October jobs report: Payrolls grew by 531,000 as unemployment rate fell to 4.6%

https://finance.yahoo.com/news/octo...artment-hiring-covid-shortages-180531280.html

(BOLD is my opinion OR what I consider important content)

"U.S. employers increased their pace of hiring in October, with declining COVID-19 infections and demand for workers amid widespread shortages helping bolster labor market activity.

The Labor Department released its October jobs report Friday morning. Here were the main metrics from the report, compared to consensus estimates compiled by Bloomberg:

• Change in non-farm payrolls, October: +531,000 vs. +450,000 expected, +194,000 in September
  
• Unemployment rate: 4.6%vs. 4.7% expected, 4.8% in September
  
• Average hourly earnings, month-over-month: 0.4%vs. 0.4% expected, 0.6% in September
  
• Average hourly earnings, year-over-year: 4.9%. vs. 4.9% expected, 4.6% in September
  

Non-farm payrolls posted their biggest jump in a single month since July. Job growth for the past two months was also upwardly revised. The Labor Department said Friday that September payrolls increased by 312,000, up from the disappointing 194,000 previously reported. And employers in August brought back 483,000 jobs, versus the 366,000 posted in the prior print.

Though payrolls have grown in every month so far in 2021, the economy remains more than 4 million jobs short of its pre-pandemic levels following plunges in employment between March and April of 2020. And the civilian labor force was still down by nearly 3 million individuals compared to February 2020 as of October.

Hiring was expected to pick up in a broad range of industries for October, but leisure and hospitality employers saw an especially pronounced boost as concerns over the Delta variant receded and enabled more service employees to return to work. These industries added back 164,000 jobs in October, or nearly double the 88,000 brought back in September. Professional and business services payrolls also jumped by 100,000, and education and health services roles rose by 64,000 in the private sector. Payroll growth slowed, however, in each of retail trade and transportation and warehousing in October compared to September, with ongoing supply chain shortages and labor scarcities hitting these industries especially hard.

In the goods-producing sector, manufacturing jobs rose by 60,000 to come in double the consensus estimate. This also accelerated from the 31,000 payrolls brought back in this industry in September. Durable goods payrolls specifically rose by 41,000 durable goods payrolls while jobs in motor vehicles and parts increased by nearly 28,000, after this industry group shed jobs on net a month earlier.

While job growth has struggled to keep pace with employer demand in recent months, the October report hinted at the start of some improvement on labor scarcities. Job openings came in at a near-all-time high in August — the latest month for which data is available — while the quits rate soared by a record. And companies have been widely citing labor shortages in third-quarter earnings reports. Mentions of "labor" on earnings calls have skyrocketed by 320% over last year, according to data from Bank of America.

"My largest concern right now — outside of inflationary pressures — is ultimately what happens with this labor supply shortage, because the labor supply shortage feeds into the supply chain issues we're seeing," Kevin Mahn, Hennion & Walsh chief investment officer, told Yahoo Finance Live on Thursday. "Everyone is forecasting a record holiday shopping season, but there will be delays in shipping. I'm not concerned with consumers' demand for products."

Other economists offered similar concerns around labor scarcities.

"On balance, we look for a substantial rebound in the pace of non-farm hiring in October, with gradual improvement in the unemployment rate and sustained strength in earnings growth," wrote Sam Bullard, chief economist for Wells Fargo, in a note ahead of Friday's report. "While positive, employment growth remains constrained by the supply side, and there is little evidence that suggests material improvement is near."

"Indeed, recent strike activity and vaccine mandates have been challenging factors on the supply front and suggest that labor market improvement will be gradual in coming months," he added.

Still, the labor data heading into Friday's report were upbeat. ADP reported Wednesday that private payrolls jumped by a better-than-expected 571,000 in October, whereas just 400,000 were expected. New weekly unemployment claims came in at 269,000, or their lowest level since March 2020, and had also broken below the psychologically important 300,000 level in the middle of October during the Labor Department's survey week for the monthly jobs report.

The labor market data is also important in helping inform the Federal Reserve's moves on monetary policy. The central bank has signaled it is looking for more progress on bringing sidelined workers back into the labor force before adjusting the rate of its tapering program or considering a hike on interest rates.

"There is still ground to cover to reach maximum employment both in terms of employment and in terms of participation," Federal Reserve Chair Jerome Powell said during his latest post-FOMC meeting press conference on Wednesday. He added that it was "within the realm of possibility" that the economy achieved maximum employment by the second half of next year, as measured by a broad range of metrics."

MY COMMENT

This is pretty good news. I am NOT concerned with inflation personally. My one.....economic.....concern is the disruption and distortion to the labor markets and as a result small business. To me this is the big danger to the success of the economy. Small business is regularly IGNORED by the media and others.....yet......it is the GUTS of our economy. It would be a disaster if our small business system is destroyed or permanently disrupted.

 

OK......signing off for now to focus on what is really important......my auction today. Keep us up there Emmett.

 

Well......I got my item in the auction. It was in the range that I was willing to pay.....but....of course.....a world record price. Typical.

 

Looks like the markets are hanging in there today. I have not looked at anything specific to any particular stocks or funds...but in general the NASDAQ looks like it has backed off some. Hopefully we will keep the averages up till the close....but.......I know that some people will be tempted to take some money as profits before we go into the weekend.

NOT me....of course.

 

YEAH....we have backed off from earlier......at least in my account. I still have a nice gain for the day but less than earlier. I had 2 stocks in the red earlier and now I have 5. I will HOPE for an end of the day bounce......but....I will be satisfied to simply stay where I am right now.

 

I see that the markets continued to drop back a bit today......at least by the time my account got to the close. I still ended up with a nice green day.....but not as much gain as I had earlier in the day when I was up on the SP500 by nearly 1%. As it was....at the end of the day the SP500 beat me by 0.06%.

Not complaining....I made enough today and this week to be very happy.

 

SO GLAD that you are thinking this way Zukodany. Trying to time some future unknown dip in the markets is fraught with danger. I would rather ride the markets down and back up compared to selling out and than seeing the markets take off on a year end RALLY.

 

YES.....as we all know....a very nice week for the averages.

DOW year to date +18.69%
DOW for the week +1.42%

SP500 year to date +25.07%
SP500 for the week +2.00%

NASDAQ 100 year to date +26.93%
NASDAQ 100 for the week +3.21%

NASDAQ year to date +23.92%
NASDAQ for the week +3.05%

RUSSELL year to date +23.41%
RUSSELL for the week +6.09%

Look at the week that the RUSSELL had.....outstanding. BUT....it still LAGS all the other averages.....year to date..... except for the DOW.

 

TGIF......the weekend is here. We start the final 8 market weeks of 2021 next week. Here is one last little article on the re-opening.

Supply chain issues see no relief in October: Oxford Economics

https://finance.yahoo.com/news/supp...ef-in-october-oxford-economics-204804721.html

(BOLD is my opinion OR what I consider important content)

"Current global supply chain issues, which some experts believe may last until early 2023, continue to hammer industry sectors from consumer discretionary to autos and housing. According to an Oxford Economics research briefing by economist Oren Klachkin, overall U.S. supply chain pressures worsened during the month of October after having eased in September.

October saw the number of cargo ships waiting to unload at Los Angeles and Long Beach hit an all-time high. And although transportation problems actually “eased modestly” last month, it still remains the most pressing supply chain issue — followed by prices, activity, labor, and inventory — based on preliminary data and Oxford Economics forecasts.

“Preliminary data show that logistics difficulties remained the most acute source of stress while prices, activity, and labor challenges increased,” Oxford Economics said. “Inventory pressures fell slightly, but conditions remain far from optimal as supply struggles to keep up with demand.”

Oxford Economics, based in Oxford, England, offers economic forecasts, quantitative analysis, global forecasting, and modeling services to a worldwide client base of over 2,000 international corporations, financial institutions, government organizations, and universities.

By the numbers

Seaborne shipping costs fell in October but remained at a level 450% above pre-pandemic numbers, as total seaborne cargo volumes received at U.S. ports reached a record high at nearly 20% above pre-pandemic levels, Oxford said. As for ground shipping woes, the briefing noted that the American Trucking Associations (ATA) estimates the driver shortage to be “worse than previously thought” at 80,000.

“The Biden administration’s deal to keep the LA and Long Beach ports working 24/7 is a step in the right direction, but isn’t enough to solve current issues because of yard space and workforce constraints, not to mention new fees on empty containers,” Oxford said.

In addition, manufacturing production costs are up 40% to 50% year-over-year while prices for services paid by producers are up over 6% year-over-year (a record high), according to Oxford. This resulted in the worsening of an “extreme imbalance” between finished goods and raw materials last month.

“Inventories fell less in Q3 than Q2, but the inventory-to-sales ratio remained lower at the start of Q4 than pre-Covid for 70% of manufacturing sectors,” Oxford said.

Things are less bleak for job-related supply chain issues as job openings and overtime hours worked are at multi-year highs, with labor cost pressures “firming” according to the briefing. Oxford cited better health conditions, school reopenings, and expired enhanced unemployment benefits as being driving factors in getting Americans back to work. However, it may be long before the labor market fully recovers."

MY COMMENT

YES.....as I have said on here about 500 times......the re-opening is going to take another 12-24 months to be complete. At that point what we have will just be the way it is. It just takes time to open an economy back up.