Right around Earth Day each year my rage peaks. It's times like now when I have to remind myself that living in a denialistic Idiocracy has environmental advantages...
Case in point, the pandemic caused the largest carbon collapse in modern history. Oil demand dropped to a 25 year low overnight. Next, the pandemic deleveraging phase will re-collapse oil demand back down to the pandemic lows. In other words, we've achieved peak oil and we didn't even know it. It all happened while our leaders were flying around to climate conferences making promises they had no intention of keeping.
All of this happened because the consumption Borg panicked over what turned out to be a relatively innocuous virus. There was no point during the pandemic when COVID was the leading cause of death. In 2020 and 2021, McDonald's killed more people than COVID. You know what I mean, shit lifestyle:
Meanwhile, the FULL cost of the pandemic is still spiraling inexorably larger like a sky-rocketing medical bill for an uninsured geezer on course to supernova bankruptcy.
As we see above, oil demand never recovered after the pandemic, because the economy was virtualized by Cloud Technology. Cloud technology, AI - it's all very deflationary because it allows knowledge workers to be replaced by technology. In other words, the pandemic completed the last stage of the full scale commodification of humanity.
During the pandemic, major corporations allowed office workers to work from home. Many companies such as Facebook encouraged workers to move out of state. Two years later and they are now instituting mass layoffs on an industrial scale. Companies are now giving employees ultimatums to return to the office or face layoff. What used to be an employee benefit is now an employee liability. And it's so much easier to lay off people when they are not in the office. Just send them an email informing them that they are terminated.
Enter earnings recession - meaning two quarters in a row of earning decline. Today's S&P companies are "beating" the quarter by having an aggregate -6% year over year decline in earnings. Wall Street will demand fresh layoffs in the new quarter or the stocks will get punished.
Here we see Challenger layoffs on a five month moving average. The highest since 2008. Note that I suppressed March 2020 due to the unprecedented pandemic mass layoff.
Another related impact of the pandemic was the downsizing of office space caused by all of this virtual working. Companies are finding that their post-pandemic office space requirements are a fraction of what they were pre-pandemic. Enter another cost cutting opportunity.
Which gets us to the fiscal clusterfuck, which is also deflationary.
Remember this guy Kevin McCarthy, the House Speaker who got voted down by his own party multiple times back in January? Well it turns out HE has to get Republicans and Democrats on board with a debt deal to avoid U.S. default within the next month.
What could go wrong?
"The clown car that has been Rep. Kevin McCarthy’s speakership spluttered to a halting start over 15 long ballots in January and hasn’t had a second of a smooth ride since"
Goldman Sachs economists echoed earlier warnings from Treasury Secretary Janet Yellen that default could occur as soon as the first half of June, due to “weak tax collections.”
Tick tock.
Put it all together and in the coming weeks, we have a clown car of incompetence heading over a fiscal cliff.
We have an earnings recession in which the most-overowned and over-valued sector (Tech) is facing the worst earnings decline of any sector.
And another Fed rate hike.
All signs point to a well deserved hard landing.
