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7am Saturday

May 9, 2020

Good morning from Findlay, Ohio!

Today we will take a look at one of the WORST economic reports in the history of economic reports. But, it’s not as bad as it sounds as the stock market has shrugged it off. It wasn’t unexpected, so equities have rallied based on a better than expected report and hope that the re-opening of our economy will bring people back to work soon!

April Jobs Report

On Friday we saw what is the worst jobs report in the life of anyone reading today’s email. That’s the bad news. But, the good news is everyone was expecting it and it surprised no one. How do I know? Look at the market reaction. The U.S. stock market was UP following Friday’s report. Here are the big 3 US market indicies and the price action for Friday following the 8:30am report:

Hopefully, we will never see a report this bad again. Here are the details: American employers cut 20.5 million jobs in April, tripling the March unemployment rate to 14.7%, the highest since the Great Depression. The coronavirus pandemic has hit the economy so hard that we have effectively wiped out a decade of job gains in a single month.

Looking at data that goes back to 1948, the prior record unemployment rate was 10.8%. Economists estimate that we reached 25% unemployment during the Great Depression.

The worst monthly jobs loss during the last recession (2008) was 800,000. The worst in history was September, 1945 when we lost 2 million jobs during World War II. So, 20.5 million jobs in one month is by far an unprecedented number.

If you’re looking for some good news, well, the unemployment rate was expected to be 16%, so we beat expectations. Another bright spot is that furloughed workers accounted for about 80% of the unemployed. As we re-open for business we can expect many of those people to report back to work.
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Here are the sectors that saw the biggest hit to jobs:

I am devastated for those who have lost jobs or who are not allowed to open their businesses. The months ahead are going to be rough for many. Although April is likely the largest job loss of the recession, there will be further job losses and the unemployment rate is likely to go higher. However, I do anticipate the beginning of an economic recovery in late summer. We will get through all of this. I promise!

Berkshire Shareholder Meeting

+ Berkshire Hathaway Annual Meeting 2020 Insights – A colleague of mine, Gary Mishuris, held a webinar on Monday with his insights from the annual meeting which was held a week ago today. Some insights:

  • Warren Buffett seemed much more somber than usual. He seemed shaken by the current environment.
  • Learn from Buffett, don’t blindly imitate.
  • Figure out how to customize Buffett’s insights into your own circumstances.
  • The current stock market prices are discounting a quick and optimistic recovery scenario…if it doesn’t happen there could be some disappointment.
  • Nobody knows how the coronavirus pandemic will impact things over time, so focus on a range of outcomes and be careful with your investments.

Great Read

+ What Have We Learned Here? (Morgan Housel) – If Morgan’s not on your reading list, you’ve got to check this out. Some very intelligent insights from recent events.

From The Team

+ May, 2020 Market Update Video (Austin Wilson) – Listen in as Austin reviews the month of April. Also, don’t miss his plan for his next haircut. You will enjoy following the story…

+ Mother’s Day Wisdom (The Everyday Advisor) – Jess interviews her mom in honor of Mother’s Day.

+ Would You Invest In Tulips? (Episode 21 of The Invested Dads Podcast) – Josh and Austin talk about asset bubbles on this episode including the bubble in tulip prices many many years ago.

That’s it for this week. I’ll leave you with this picture of my mom with our kids from last Mother’s Day.

Family is everything, and I’m very thankful for my own mom, and all she means to our family. (After all, she was the first subscriber of 7am Saturday 😉) We love you mom!

Happy Mother’s Day to my mom and all the Mom’s reading today…

Adam