I share these observations with you, dear reader, in the hopes that the information is helpful in meaningful ways that translate in direct benefits to your business.
Recently I wrote about some of the metrics I follow many of which are flashing bright red right now. I'm shocked (yes, still) when I see that nowhere in the mainstream media complex is anyone shedding light on these issues which are really critical.
Like everyone else in the country right now I'm shopping for groceries, buying supplies, making cost estimates for work I need done. Absolutely everything I used to pay for has more than doubled in less than two years with very few exceptions however my income hasn't done the same. At all!
The stress that the increased costs / stagnant incomes is causing is just now starting to show up and it has caused a doom-loop cycle of more pulling back which causes others to pull back also. Everyone now expects to see higher prices so they do. Everyone is faced with making choices about what or when to buy things and that takes time to work through the system.
Lenders are pulling back for a variety of reasons and that alone has caused many business owners to pay much more for working capital than they did in the past assuming they can even get approved for a loan.
"On the other side of the ledger, loan volumes sank notably with both Large Banks (-$18.8bn) and Small Banks (-$2.5bn) seeing a drop in lending..."
Which isn't surprising considering the banks are still...yes, still hemorrhaging deposits
"So, DOMESTIC BANKS saw $38.5 billion OUTFLOWS (SA) but $52.6 billion INFLOWS (NSA)..."
Naturally, it's the small business owners who are affected the most. The covid policies decimated the small business community and made the bigger players wealthier and with more market share causing tens of thousands of small, family run businesses to close forever.
"Among the many grim memories from the depths of lock-downs were boarded up local shops and long lines outside the big-box stores like WalMart, Kroger, Whole Foods, and Home Depot. For very strange reasons, small business was universally declared to be nonessential whereas the big chains were deemed essential.
This amounted to a massive industrial subsidy to large companies, which emerged from the pandemic period richer and more bloated than ever. Meanwhile, millions of small businesses were utterly wrecked.
Nearly every day, my inbox fills with tragic stories of family businesses that were just getting going when the lock-downs came and destroyed everything. Not enough of these stories were ever told. Major media were not interested."
Now, just as the dust settles and the survivors of those extremely misguided policies which did so much damage are finally starting to pick up the pieces, we're now careening toward a finacial cliff as bad things start to happen to everything everywhere all at once. What things you ask?
"Meanwhile, according to a recent Fitch Ratings report, the corporate default rate is projected to climb to as high as 4.5 percent in 2023, up from the previous forecast low of 2.5 percent. The updated projections reflected “the tighter lending conditions and capital access resulting from stress in the banking sector and inflation uncertainty.”
The weakness in commercial office building is going to cause cascading defaults from very big players further weakening lenders' desire to take risk there.
"After blowing through the pandemic with no more than a squiggle, the delinquency rate of Commercial Mortgage-Backed Securities (CMBS) backed by office properties jumped to 4.5% by loan balance in June, up from 1.6% just six months ago in December 2022, according to Trepp, which tracks and analyses CMBS."
And here is one of my "pet metrics" which are sometimes a little "kooky" but, I believe they represent actual reality better then the hopelessly fraudulent "official statistics"
Cash-strapped Americans are panic-searching "pawn shop near me." The search trend spiked to a record high at the start of July and is an ominous sign the consumer might be pawning items or selling things that were possibly bought during the Covid boom to raise quick money amid the worst inflation storm in a generation.
So, the message is we're looking at higher cost of doing business and lower demand - that simple. How deep and long this particular down-turn will be depends a lot on how it is managed by the folks in charge. Based on everything I have seen so far, they are utterly and completely useless. If anything, I would say that the people we now depend on to save us from this inferno are the very arsonists who started it.
