DIASTOLE ECONOMIC AND MARKET COMMENT
May 20, 2019
Okay, sure, there were trade-war updates, and Uber news, and Big Pharma lawsuits, but let’s start with the most important story: Jeff Koons’s sculpture of a rabbit.
It just sold at Christie’s for $80 million plus costs and commissions of over $11 million, for a total of more than $91 million. That’s the most money ever paid for a work by a living artist. But - wait for it - the three-foot-tall “Rabbit” is made of stainless steel and was cast in an edition of three. That’s right, it’s not unique. AND, the buying art dealer (for a client) was Treasury Secretary Steven Mnuchin’s father. AND, given Jeff Koons’s method of working, it is quite possible that he never touched the work, which was probably made by apprentices. $91 million. Here’s a reminder of how the art world works, or doesn’t: the money goes to the seller of the work (in this case, the estate of S.I. Newhouse, who died in 2017) and none to the artist. Maybe Koons is onto something when he doesn’t make his own art.
So - back to the lesser news. It’s a little hard to keep track of where we are in the tariff war with China, but basically, we imposed more on them, and then they imposed more on us. And at the same time, the Trump White House keeps saying that we’re near a trade deal, although the Chinese say no such thing. The markets don’t quite know which way to turn, although we are only slightly off recent highs.
The bigger question is whether China will stop buying, or even will sell, U.S. Treasury bonds. They are the number one foreign holder of U.S. debt. In other words, when we overspend, which is always, China loans us money. What will happen if they stop?
Tangible good news arrived on Friday, when President Trump lifted tariffs on metal imports from Canada and Mexico, and instituted a six-month delay on the possible imposition of tariffs on automobiles from Europe, Japan, and other countries. That decision will now be made in November. Congress had reportedly refused to ratify USMCA, the replacement for NAFTA, until the tariffs were lifted.
The U.S. birthrate is at a 32-year low. Our birthrate has been less than needed to replace us largely since the 1970s, but is not yet lower than our death rate. The replacement rate is 2.1 births per woman, while we are currently achieving only 1.7 births per woman. 2% fewer babies were born in 2018 versus 2017. In the past, we have made up the difference in the tax base through immigration, but that may be changing.
A jury in Northern California just awarded $2 billion to a couple who claimed that Roundup weedkiller caused their cancers. This is the third straight loss for Bayer, which last year bought Monsanto, maker of Roundup. When Bayer made the acquisition, there had been no awards to Roundup claimants. Surely now they have buyer’s remorse. Roundup is still on the market, and has no warning labels.
The moon is shrinking like a raisin as it ages. Well, so am I, but that’s not news. The aging and cooling process that is natural on planets is causing moonquakes. Additionally, the drag of Earth’s gravitational pull also causes moonquakes. Also, the hollowing out of the moon, which is used by alien spaceships as a giant hangar, is creating stress on the moon’s crust. (It’s called The History Channel because it’s true!)
Uber, whose recent IPO was kind of a disaster, received good news from the National Labor Relations Board, which concluded that Uber drivers are contract workers and not employees. Uber drivers claim that they are employed by Uber and deserving of at least minimum wage and benefits. On the news, Uber stock turned slightly upward, although it is still trading about 8% below its offering price.
Six more states are suing Purdue Pharma for alleged illegal marketing and selling of opioids, contributing to a nationwide epidemic responsible for 47,600 overdose deaths last year. That brings to 45 the number of states which are currently suing Purdue, maker of Oxycontin. Additionally, members of the Sackler family, which owns Purdue, are included individually in many of the suits. The Metropolitan Museum of Art, among many art museums, has announced that it will stop taking donations from the Sacklers, a generously philanthropic family.
Green funerals are on the cusp of becoming big business. Currently, “regular” burials also inter lots of formaldehyde and whatever is used to preserve wooden caskets. Cremation releases carbon and mercury into the atmosphere. One current option is a green burial, in which the body is unembalmed, and the caskets are biodegradable. But the state of Washington is poised to be the first state to approve human composting (also known as “natural organic reduction”. In this process, already used for cattle, the body is placed in a steel container with bacteria, wood chips and straw and kept at a high temperature for a few weeks, after which about two wheelbarrows-full of topsoil comes out. Who’s thinking geraniums?!
Finally, another entry in the “why didn’t we think of that” category. In China, the government maintains a list of everyone who has been ordered by the courts to pay money. Now some phone companies have used the list to give a special ringtone to the debtors. AND callers to those debtors are encouraged to remind the laolai, as they are called, to pay their bills. This is part of China’s campaign to use public shame and approbation to influence the behavior of its citizens. Scarlet letters are probably next.
San Francisco has replaced Zurich as the city where you can earn the most and also have the most disposable income after rent. Or after earthquakes. Move there, but buy insurance.
For the week ending May 17th, the Standard & Poor’s 500 finished at 2,859, the Dow Jones Industrials at 25,764, and the Nasdaq Composite Index at 7,816. The yield on the ten-year U.S. Treasury Note closed at 2.39%. U.S. oil cost $62.76 per barrel, N.Y. gold cost $1,274.50 per ounce, and one Euro was worth $1.1159.
Elizabeth E. Cook
News and information presented here was gathered from sources believed, but not guaranteed to be reliable (we’re looking at you, The History Channel), including The New York Times, Bloomberg, Barron’s, The Economist, Business Insider, The Wall Street Journal, CNBC, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220 or reply to this email. Happy Memorial Day!