Nov. 1, 2021

Lock-Out Day 1: My Preview Of Q-4 2021.

Welcome to the first day of a brand new quarter.

A special quarter. In that, this is always the time when corporations come together to strive to reach their overall goals, and then to tell the world about their accomplishments.

For the sales and marketing departments, it's the last few weeks, when they can reach ahead to make those objectives that they set at the beginning of the year.

For finance and accounting, they are already looking forward to the year-end financial statements and annual report, which for most companies will be written at the end of this quarter.

For management, it's a time to rally the troops, remind them of those goals. And to look forward to board and shareholder reports. Hopefully reports that are full of accomplishment and reward.

For us, as investors now is an opportunity to look at the MACRO environment, and project what lies ahead for American Business and Industry.

Last week gave us some indication of what to expect in this all-important Q4 2021.

In that week we had all 5 of the big 5 stock market leaders report. And here the results were mixed. We had positive results from both Microsoft and Alphabet/Google. But overall poor results from Facebook, Apple, and Amazon. Amazon was perhaps the most stunning, as their income was nearly half of expectations.

Overall we'll mark these 5 results as barely a C+. A big caution flag going into the last quarter.

Next came the preliminary estimate of Q3's GDP report. To say this was a surprise, would be an underestimate. GDP had declined to a growth rate of just over 2%.


Yes, there were some analysts who saw this coming. But most of the Street felt that this report would be much better than it turned out to be. And most of those who saw the economy as this weak did so on the basis of the Atlanta Fed's estimate in their GDP Now. Which incidentally since that report has declined to a mere 1/2% growth rate.

Stall speed.

Together these two sets of results, present us with probably the best “Big Picture” look at where we stand right now. Anyone reviewing these results should approach Q4 with extreme caution, based on these reports.

Now the fourth quarter is the quarter when retail sales shine. It's the time of the holidays and those special year-end sales. And certainly, retailers across the country are hoping that repeats this year. However, right now, retail sales aren't looking so good. Over the past 6 months, retail sales have been only slightly positive, with the two months of May and July showing a decline in sales. So a big question market goes next to the Consumer, and retail sales.

I expect that the two big negatives in the economy: inflation and the Supply chain woes, will remain about the same. And there is nothing coming out of Washington or corporations headquarters to indicate any change at this time. So mark prices, and availability to remain a drag on the economy.

This brings us to Washington, and what we can expect coming from our nation's leadership. From the Fed, we're likely to see the beginning of the Taper. To be announced by Chairman Powell on Wednesday, and to commence just a couple of weeks later. I doubt that this will have a dramatic impact. But it should take a bite out of financial liquidity. And that can't be considered positive.

The other branch of our federal economic leadership will come from Congress and the Treasury. Now, who knows where Congress is going as they seem to be in complete disarray. But I do think there is a high probability that we will see higher taxes going forward. And I must not be alone in this, as you'll remember Facebook took a much higher tax reserve in their quarterly report. So look for higher taxes straight ahead, something that also is not positive.

Finally, we come to labor, and the area I think will be the real wild card this quarter. As we discussed yesterday, I believe that this quarter will be the beginning of the great Lock Out. A time when many, perhaps most leading companies will begin locking out their employees. Over the weekend we saw American Airlines cancel thousands of flights presumably because certain of their employees refused to comply.

I think that this is the beginning of what will metastasize into a very large problem for our economy. As American Corporations have taken in on themselves to establish the nation's health standards.

Something that in and of itself is unprecedented.

I do however believe that there is an analog. And that analog was the Second Quarter of 2020. As you may recall that was the time of the economic lockdown. When various governments, principally governors and mayors, locked down their economies, mandating that people should quarantine at home and that non-essential businesses should close.

I believe that this new policy by principally corporations and businesses, to lock out their workers, will have much the same effect.

So it would not surprise me to see this new lock-out have the same impact as lock-down. And lock-down 2020 saw the nation's economy drop by over 9%. One of the largest declines in history.

SO overall as we enter the Fourth Quarter of 2021, we should all prepare, both in our day-to-day life and in our investments for a substantial impact if this trend of lock-out continues.

Lock Out 2021: that's the trend to watch.