No one is alive today that remembers the last time a storm the size of Milton hit Tampa Bay since that was in 1900.
If you're wondering why I'm so focused today on this weather-related issue (besides the fact I'm directly in it's path) it is because of how profoundly it has affected small business owners and will continue to do so for quite some time. In some areas the entire supply daisy-chain was obliterated for businesses like gas stations and one-stop shops who will need to operate in stone-age like conditions before anything resembling "normal" returns.
FEMA has been accused by locals in North Carolina of not simply failing to provide aid where it's critically needed, but also of preventing private citizens from helping.
This news has repulsed me to my core but it doesn't surprise me considering how much more of a priority they give to their foreign aid spending:
"In almost one week, the Biden-Harris administration approved:- $8.7 billion in military aid for Israel- $8 billion in military aid for Ukraine- $567 million in military support for Taiwan- $750 one time emergency assistance payment for American victims of Hurricane Helene. Let that sink in!"
This chaos is happening literally weeks before the election which itself promises to be chaotic. Neither side of this highly charged political fight will accept defeat at the polls and will most likely dispute whatever the result is. There is no certainty at all about what policies we will be dealing with in just a few months and that makes even simple planning a crap-shoot.
Owners already take big risks just running their businesses any of which could put them out of commission; increasing those risks has reduced economic activity significantly and the Fed rate cuts can't happen fast enough to change anything.
"The Federal Reserve recently cut its benchmark interest rate by 50 basis points, or half a percentage point, to a range of 4.75–5 percent, citing growing confidence that inflation is on a sustainable path toward the Fed’s target of 2 percent. However, Powell cautioned in his speech on Sept. 30 that the Fed remains vigilant and will not hesitate to make further adjustments if necessary."
Even the cut they made two weeks ago is already failing to keep consumer rates down like mortgages. You see, the Federal Reserve THINKS it determines what interest rates are but Mr. Market actually does and he's not buying it:
"The average 30-year fixed mortgage rate exploded on Friday by 27 basis points to 6.53%, according to Mortgage News Daily. It was quite a mess (chart via Mortgage News Daily)."
Naturally, very few owners will notice the signs of economic decay until they become affected directly by it. This is understandable since normalcy bias keeps many people from acting until it's too late. One of my fellow parishioners who had survived decades of storms here in Florida told me she was sitting on her couch watching TV while hurricane Helene raged around us; she set her foot down to get up and realized there was already 12 inches of water in her living room. By the time she got up to do something the water was already waist-high. If I was to use this analogy to describe where we are financially, you might consider me extreme however, that is the case.
"The reason people refused to believe us is because the danger was not immediately obvious. The economic threat was not hitting them in their wallet yet. Stock markets seemed to be doing fine. The jobs market was still functioning somewhat normally. They could only view economic crisis through the lens of a total collapse. The idea that it would happen incrementally never crossed their minds.
Even today there are still people who argue that everything is fine. The stock market is “fine.” The labor market is “healthy.” If you suggest all is not well, you’re a “chicken little.” This is the incredible danger of having a Hollywood fantasy idea of collapse. We may never get to 100% systemic implosion; but even a 50% collapse is still a survival situation."
Right now, commercial lending is operating normally without any major disruptions. SBA is funding commercial term loans with monthly payments and 10-year terms for qualified companies whose ownership has robust credit (650+ fico scores are required for all owners above 20%). That could change in a heartbeat but, for now, this is where we are.
The rate cuts will accelerate purchasing power destruction as inflation blows up. The dock workers strike which would have sent the business community into financial convulsions was averted (thank God) but only with a 62% wage hike. 62%!! How many of you could afford to give YOUR personnel that kind of raise?
I hope and pray that I'll be here in a few days to follow up with a new post, for those of you who have faith, please pray for me too!