What Next

 The question of the month…. Is Rink Rats turning into a quarterly blog?

The answer is no. A late winter and spring of family visits, too many faculty meetings, writer’s block, vodka tonics, and general laziness. But we are back and hopefully ready to inform and entertain our loyal following.

MARKET WEEK - The US stock market just had its worst month since March 2020, when the world shut down due the pandemic. In April, the S&P dropped 8.8%, the Dow 4.9%, and the Nasdaq, 13.3%—which marks that index’s worst month since 2008.

But…the world isn’t shut down now, nor is there a financial meltdown. So why are stocks acting as if we’re in crisis? Because the market has bleaker growth prospects than an air mattress after you fall asleep.

The primary headwind for growth, of course, is the Fed’s plan to hike interest rates in order to cool inflation. This hawkish turn has been especially painful for high-flying tech companies, which become less attractive as interest rates move higher.

Cathie Wood’s ARK Innovation fund, which is perhaps the best-known fund for futuristic tech stocks, just had its worst month ever, falling 26%. Note: RR owns some shares of this fund, “Ouch”.

That fund includes Zoom (down 82% from an all-time high), Roku (–80%), and Coinbase (–67%).

A secondary concern: Supply chain bottlenecks are still stinging corporate giants. With China locking down cities at the first trace of Covid, American companies whose products are made in Chinese factories aren’t able to fulfill orders. Apple said Thursday that it would face up to $8 billion in losses due to restrictions in Shanghai.

As if all that didn’t provide a bearish enough environment for investors, the war in Ukraine has introduced challenges for companies across virtually every sector. For evidence, just note how Snapchat said its sales were hit when advertisers paused campaigns following the outbreak of the war.

The stock market plunge of March 2020 was followed by skyrocketing growth. Don’t expect a rapid recovery this time around, many analysts predict. The Fed, which is playing catch-up on inflation, will have to hike it until it hurts.

•          ExxonMobil and Chevron posted meaty profits last quarter thanks in large part to rising oil prices.

•          The FBI rummaged through the electronic communications of up to 3.4 million US residents for a year without a warrant, per a new report from the Office of the Director of National Intelligence.

•          Tennis great Boris Becker is going to jail for two-and-a-half years for hiding assets to avoid paying debts.

•          The French are drinking a lot less alcohol than they used to.

 

FED BLAME GAME - It's high season for being mad at the Federal Reserve. Critics say the Fed was feckless as inflation built last year — and as a result, the U.S. faces prolonged inflation, a painful recession or both.

In reality, the Fed didn't create the current inflationary surge by itself — but it was too complacent as prices spiked last year.

Now the economic future depends on the central bank's ability to make up for lost time, and navigate a tightrope-thin path to bringing inflation down without tanking the economy.

The Fed always takes heat for its decisions. That is to be expected when a handful of technocrats make decisions, behind closed doors, that shape a $24 trillion economy.

Think of it as the Supreme Court, but with no robes and more math.

Last year, even as inflation started to surge, the Fed kept its aggressive monetary stimulus — interest rates near zero and buying billions of dollars in bonds — in place, only ending it last month.

Insiders at the central bank don't really dispute that they should have begun withdrawing that stimulus earlier.

The Fed was lulled by the fact that the initial surge of inflation last spring was concentrated in a handful of categories, then by a temporary softening in inflation last summer.

At the same time, it's not clear that inflation right now would be radically different in an alternate universe where they had moved to tighten money earlier.

"It is unlikely that the Fed could have lowered the inflation rate in 2021, because the fiscal support was so massive and its tools work with a lag," Jason Furman, the Harvard economist and former White House economist.

But by not acting sooner, the Fed has increased the risk that inflation will remain high through 2022, and beyond: “If it had been more aggressive last year, we would be seeing the effects more this year.”

Countries with central banks that did tighten faster are also experiencing high inflation. (In New Zealand, which raised rates back in October, it's 6.9%.)

The real risk is that by waiting as long as it did to pivot to tighter money, the Fed will have to move so quickly to catch up that it triggers a breakdown, as the economy struggles to adapt to a world of less abundant cash.

The Fed has been assigned a task by Congress that's easy to describe, yet fiendishly difficult to achieve. It's known as the dual mandate: to achieve both price stability and maximum employment.

During the high unemployment and low inflation of the 2010s, both parts of that dual mandate pointed in the same direction. Not anymore.

The Fed is in a new world in which it faces more explicit tradeoffs. That will make achieving assigned goals harder — and maybe impossible.

How it works: The central bank now formally defines price stability as inflation of 2% per year, as measured by the core personal consumption expenditures price index.

This is the part where the Fed is failing. Inflation was up 5.4% over the 12 months ended in February, far overshooting the central bank's target, though by less of a margin than the more widely covered Consumer Price Index.

The definition of "maximum employment" is squishier. Median official Fed estimates show the longer-run unemployment rate is 4%, though policymakers also emphasize a lot of uncertainty around how low unemployment can go without sparking excessive inflation.

In any event, the view at the Fed at the moment is that the job market is too hot — "tight to an unhealthy level," as Chair Jerome Powell put it in his news conference last month.

 

GRAD SCHOOL OF HARD KNOCKS - There's nothing like living something to turn you into an activist determined to fix it. That's an experience that has been shared by a lot of college graduates who find themselves working hourly gigs at Starbucks and Amazon. During the years this has become a more common post-grad experience, "support for labor unions among college graduates has increased from 55 percent in the late 1990s to around 70 percent in the last few years." And this experience has "united many young college-educated workers around two core beliefs: They have a sense that the economic grand bargain available to their parents — go to college, work hard, enjoy a comfortable lifestyle — has broken down. And they see unionizing as a way to resurrect it..

It would have been nice if we had listened to the revolt of the working class before it included so many college graduates. They've been getting the shaft for decades and almost every massive American problem can be traced to the now sickeningly wide economic divide.

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Judy Collins (83), Christina Hendricks (45),  Chris Krich ….famous leader, Willie Nelson (89), Michelle Pfeiffer (64), Jerry Seinfeld (68), Robb Suffredini ….need good employees, he is your man, Sula Vanderplank …..famous botanist,

 

CHRONICLES OF HIGHER EDUCATION - BIDEN SAYS HE’S CONSIDERING CANCELING SOME STUDENT LOAN DEBT —- President Joe Biden confirmed on Thursday that he’s considering canceling “some” amount of federal student loan debt but emphatically ruled out acceding to progressive demands to forgive as much as $50,000 per borrower.”

WAPO: BIDEN SHOULD RESIST CANCELING STUDENT DEBT — The Washington Post editorial board says Biden should restrain himself when it comes to student loan forgiveness, arguing that “across-the-board student debt cancellation, which left-wing activists and politicians demand, would amount to a regressive subsidy for many high-income university graduates.”

“Mr. Biden should continue to resist these irresponsible demands, even as his administration looks for ways to offer more targeted relief. Congress, meanwhile, should make clear that high-income borrowers need no more federal help and instead put the money into college finance programs tailored to aid the needy.”

CHRONICLES OF HIGHER EDUCATION PART DEUX - Food pantries have become common features of campus life. Now, colleges are beginning to recognize another basic student need: affordable, safe, reliable transportation.

While only a few institutions currently provide or facilitate low-cost access to transportation — typically through subsidies for bus, subway, or light-rail rides — such benefits are likely to grow as recognition of “transportation insecurity” continues.

It’s about time. And with billions in federal infrastructure dollars soon to start flowing, the timing could also be opportune.

The Science of Learning - Scholarship on teaching and learning has grown exponentially over the decades, encompassing thousands of experiments, stacks of books and journal articles, and major initiatives to bring the science of learning into classrooms. But many faculty members remain untouched by this work, unsure how to apply it to their teaching, or skeptical of its value. Education researchers, learning scientists, and teaching coaches say they often feel as if they’re preaching to the choir — or to one another, the same subset of professors eager to try new practices. And what does get through to many faculty members and students is often garbled, or just one piece of the puzzle.

So, what’s going on? Some of the bottlenecks are a product of the structures and systems of higher education, in which faculty members are given few incentives for, if not actively discouraged from, improving their teaching. They care about their students, but they don’t have the time, understanding, or motivation to make their courses better. At the same time, colleges enroll students from a wider range of backgrounds, they’re seeing firsthand the unintended consequences of methods such as high-stakes testing, rigid course structures, and lecture-based classes, all of which set up students from disadvantaged backgrounds to flounder or fail.

Teachers are leaving the classroom for jobs in the private sector, where talent-hungry companies are hiring them—and often boosting their pay.⁠

⁠The rate of people quitting jobs in private educational services rose more than in any other industry in 2021, according to federal data. Many of those are teachers exhausted from toggling between online and classroom instruction, shifting Covid-19 protocols and dealing with challenging students, parents and administrators.⁠⁠

The potential for career and pay growth—some roles are paying tens of thousands of dollars above typical teacher salaries—is alluring amid a long stretch of Zoom learning and pandemic-stressed classrooms, former teachers say.⁠

⁠The exodus is worsening a nationwide teacher shortage and proving a boon to hiring managers in industries such as IT services and consulting, hospitals and software development. Teachers’ ability to absorb and transmit information quickly, manage stress and multitask are high-demand skills, recruiters and careers coaches say. Classroom instructors are landing sales roles and jobs as instructional coaches, software engineers and behavioral health technicians, according to LinkedIn.⁠

 

DRIVING THE WEEK - Boarding just got more pleasant for Delta flight attendants. The company announced it’ll begin paying flight attendants during boarding time. It’s a first for a major US airline (typically, flight attendant pay begins when the plane’s door closes and passengers are seated). The Association of Flight Attendants, a union that has been attempting to organize Delta employees, said, “This new policy is the direct result of our organizing.”

 Robinhood announced layoffs. The trading app is letting about 9% of its full-time employees go, saying that its hiring spree last year led to “duplicate roles and job functions.” Robinhood’s stock is down more than 71% since it went public last summer.

 A lot of you had Covid. At least 58% of the US population had antibodies from a previous Covid-19 infection in February, up from 34% in December, according to new data from the CDC. What happened in between? Omicron. Another startling finding: 75% of children and teenagers have antibodies from a previous infection.

 

THIS IS BAD - Roughly 4 in 10 Republicans and independents say that violent action against the government is sometimes justified, according to a startling new WaPo-University of Maryland poll.

Overall, “the percentage of Americans who say violent action against the government is justified at times stands at 34 percent, which is considerably higher than in past polls by The Post or other major news organizations dating back more than two decades,” write WaPo’s Dan Balz, Scott Clement and Emily Guskin. “Again, the view is partisan: The new survey finds 40 percent of Republicans, 41 percent of independents and 23 percent of Democrats saying violence is sometimes justified.”

22% of Republicans say they thought the 2020 election was fair.

How many Peter Meijer’s (Republican, 3rd Michigan District) are in the Republican Party?

 

THIS IS BAD, PART DEUX — A new CBS/YouGov poll finds that 68 percent of respondents see the Jan. 6 attacks as “a harbinger of increasing political violence, not an isolated incident,” write CBS’ Anthony Salvanto, Kabir Khanna, Fred Backus and Jennifer Depinto. “That leads to larger misgivings. When people see it as a sign of increasing violence, they're more likely to think violence is a reason democracy is threatened.”

“There is 12% of the country , and a fifth of Trump's 2020 voters, that want Trump to fight to retake the presidency right now, before the next election. … [A] third of the people within that 12% say he should use force if necessary. While that only amounts to 4% of the population, it still translates into millions of Americans effectively willing to see a forceful change in the executive branch.”

 

TOUCHED FOOTBALL - For some Americans, the separation of church and state has been a long-established norm. But as we've seen over the past several years, what some see as established norms others see as detours from the America they want. For those folks, the modern interpretation of the separation has just meant that prayer in schools has been on the injured reserve list until they could get it back. And, with the current makeup of the Supreme Court and a new coach on the sidelines, that team finds itself in the red zone.

ESPN: How an unknown high school football coach landed in the center of a Supreme Court religious liberty case. "All he wanted, he says, was to connect with young people by coaching football, and to connect with God by saying a brief midfield prayer after each game. 'I'd take a knee and thank God for what the guys just did and the opportunity to be a coach,' Kennedy told ESPN, adding: 'I wanted to hang out with my players and develop these young men.' Yet the 52-year-old finds himself out of coaching and in the midst of a raging legal battle ignited when he insisted on taking a knee at midfield to pray after games, often with students. Bremerton public school officials fired him in 2015 after he refused to stop his on-field prayers, which they said violated the Constitution's prohibition against government endorsement of religion." (I guess I'm an outlier. During hockey practices and games, I always took a knee because I was tired.)

 

THE BEST TOURNAMENT IN THE WORLD - Before The Swami reveals the winner of the 2022 Stanley Cup playoffs. I'd like to just offer a small reminder to establish a baseline for your expectations:

I picked the Detroit Red Wings to make the playoffs.

But that was before the season. Now I have 82 games of data, observation and results on each team to rely on for my prognostications, rather than just vibes. Although, in fairness, sometimes vibes work too.

The brackets are set, and so are the rosters. The 2022 Stanley Cup playoffs commence beginning Monday night, with June 30 as the last possible day for the Cup to be raised. Who will win? Who will lose? Who will shock the hockey world, either in victory or in defeat?

Western Conference:

First Round – Colorado, Minnesota, Calgary, Los Angeles

Second Round – Colorado, Los Angeles

Conference Champ – Colorado

 

Eastern Conference:

First Round – Florida, Tampa Bay, Boston, Pittsburgh

Second Round – Florida, Boston

Conference Champ – Florida

 

Stanley Cup Champion: Colorado Avalanche

 

THE SWAMI’S WEEK PICKS –

MLB Game of the Week – Saturday 5/7, 1:15 PM (PDT), FS1: Our first MLB game of the year. The Swami is picking a Toronto Blue Jays v. Los Angeles Dodgers World Series. St. Louis Cardinals (12-9) vs. San Francisco Giants (14-8).  The Giants are off to a surprising start, they take this Saturday Showcase¸ Giants 5 - 3

SCIAC Conference Pick of the Week – Friday 5/6, 3:00 PM (PDT): Chapman University Argyros (28-9) vs. University of La Verne Leopards (27-7-1). The first game of a three-game set to determine the SCIAC regular season champion. The Leopards have many fine business students in their lineup; thus, we like them in game 1: La Verne 6 – 3

Season to Date (5 - 2)

 

Next Blog: Commencement Season and Jack Ass of the Month

Until May 9, 2022, Adios.

Claremont, California

May 2, 2022

#XII-9-446

 

2,978 words, six-minute read

 

CARTOON OF THE WEEK – Dilbert

 

 

RINK RATS POLL – Did you get a pet during the pandemic?

___ Yes

___ No

 

QUOTE OF THE MONTH – “The problem with the world is that everyone is a few drinks behind.” – Humphrey Bogart

 

 

Rink Rats is a blog of weekly observations, predictions and commentary. We welcome your comments and questions. Also participate in our monthly poll. Rink Rats is now viewed in Europe, Canada, South America and the United States.

Posted at Rink Rats The Blog: First Published – May 3, 2010

Our Eleventh Year.

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