On stage, investing superstar Peter Lynch once held up a computer hard drive to the audience. The latest and greatest expression of mankind’s technological prowess.
“What a piece of shit,” he called it.
As an investment opportunity anyways. Yeah, Lynch never had much of a problem expressing himself. Point is, he went onto say, those interested in the stock market would be better off keeping their eyes open, seeing which retailers were busy, which factories was making lots of deliveries, that kind of thing. Call it situational awareness. As far as it goes, it’s excellent advice. Anyways, this is my story. I promise it’ll be short.
Don’t ignore the mundane
Sometime during the mid-ish 90’s, a colleague of mine lost her car. Thing just up and died on her and fixing it was going to cost more than it would take to replace it. That, I didn’t notice. What I did notice, and I could hardly help it she was so ecstatic, was when she got another. Thirteen months later. For over a year she had been getting a ride to and from work, and hers was a long commute. She, her husband and their two kids lived out in the back-of-beyond in New Hampshire and our place of work was over the state line in Amesbury, Massachusetts. She depended on someone else for over a year, remained housebound with kids until her husband got home with their remaining car, and I knew him too. An open-and-closer, he was one of those guys who was there waiting for someone to open up, six in the morning, and put the lights out late every night.
When you’re not living someplace that doesn’t provide public transportation doing without a car is a big deal. Food shopping, anyone? Of course, it turned out that they couldn’t afford it, that it took a full year to put together the scratch to buy a second-hand Jeep Grand Cherokee. Penny by penny—and it wasn’t a cash-only purchase, either, I asked.
Their involuntary sacrifice drove me to check out our own parking lot. What struck me was that the 60-odd employees drove a mixture of cars some old, some new, but what what I noticed was that those who were married with kids in their prime working years (25-54, give or take) were driving clunkers. Those (few) who were nearing retirement and the kids living at home with mom and dad owned the bright-and-shiny-new rides. Ok, that makes sense, I thought, basically, things are going pretty well, aren’t they? But I couldn’t shake it, and the stories just kept rolling over me. Bump into an old friend, and his story was lost my job, hadda sell the house, a sister was downsized went back to school and retrained, a neighbor (an experienced Oracle DBA, btw) needed a jump-start one morning and his story was that he was going to be late for a job interview (didn’t get the job, they wound up selling the house a few months later).
The dot-boom caught me up a few years later (as a self-taught data analyst) then went bust (though we survived), I kept a casual eye out, comparing everyone’s situation to my own, because by then, I found myself pretty much in the same boat as that couple who had to scrimp and save a whole year to make a down payment on a car. I came to know a grad with a business degree driving a forklift in the local Home Depot, another guy I know schleps coffee in a local Barnes and Noble with an advanced degree in astrophysics—from Harvard, no less (his wife is the working astrophysicist), a combined degree in information tech and business was good enough to land someone else I know well a job in the shipping/receiving department of an LL Bean store nearby and my oldest friend, with a journalism degree and long, successful career in trade associations, came to stock shelves in a CVS.
Peter Lynch’s Ghost
None of this was reflected in the data. Housing prices were healthy, then began rising even faster than they had in the 80’s. If you take anything less than 6% unemployment as a rule-of-thumb demarcation line for full employment, we were in great shape. All of which rang hollow in face of what I was seeing around me, and things get harder for working people of all stripe. For an economist, what matters is that someone else stepped up to buy the house which that Oracle administrator couldn’t hold onto. which I thought kind of misses the point. Indeed, that particular buyer who moved into the house after the Oracle guy sold it in a matter months later as well. Same with the one after that.
Of course, it couldn’t last. I’m not a market player, never was, but I did keep an eye out. By the summer of 2003, seeing every earnings season pass with disappointments left and right, except for the home sector—which couldn’t be off shored please note, I felt bad enough seeing the collision course housing and car prices were on with an increasingly iffy job market to cash out of all the mutual funds I had savings in. I paid the penalty for withdrawing from my 401(k) and never looked back. Did I leave money on the table? Don’t care. That’s just the way it is. What’s more important is that employment/demand tanked in the mid-90’s and shows no signs of getting better. As far as I’m concerned, the period from 1995 to 2008 was a prolonged Wiley Coyote moment. Standing over the abyss, but hadn’t quite gotten it yet.
So when Frances Coppola saw the current market meme is one of falling commodity prices snd China’s softening outlook:
— Frances Coppola (@Frances_Coppola) January 15, 2016
I see commodities and China (as well as shipping indices) as merely a symptom of sagging demand. Welcome to the new normal, folks. We can toss Say’s Law onto the trash heap of demonstrably inadequate economy theories.