Monday Moneybeat - Looking for some silver linings

BRIAN BASHAM, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Initial claims for unemployment benefits continued a six-week trend downward, and last week fell below 3 million for the first time since a virtual economic freeze took hold the third week of March. 

But to say it that way is to risk forgetting that even at 2.98 million, new applications for jobless benefits remain more than 10 times worse than what was normal all year up to mid-March.

April retail sales are in. The Commerce Department says month-on-month they’re down 16.4 percent compared with March. Versus last April, year-on-year retail sales are down 21.6 percent. 

With the exception of groceries, no retail sector was spared significant damage. Clothing stores: down 90 percent. Electronics and furniture: off by two-thirds. Sporting goods, restaurants, and bars: down by half. 

One detail on Starbucks. This is a coffee chain that can sell three shots of espresso and fill the cup the rest of the way up with hot water, and get three dollars for that. Not a bad profit margin item! Yet, Starbucks placed its landlords across the country on notice: Starbucks cannot afford to pay rent for the next year.

It is rough out there. Financial analyst and adviser David Bahnsen is on the line for our weekly conversation. David, good morning.

DAVID BAHNSEN, GUEST: Good morning, Nick.

EICHER: What do you make of the numbers?

BAHNSEN: Well, again, the headline number to me doesn’t make sense because you would think it would be so much worse. How could retail sales have only been down 16 percent? But then you look under the hood and we answer the question with some of the sub details you just provided. 

Obviously when they say restaurants are down 50 percent, that has to be from food delivery offsetting because restaurants would otherwise have been down very close to 100 percent. 

So, within the news itself, there’s some things that did understandably well because of the nature of the shutdown and other things that did understandably terrible, also because of the nature of the shutdown. The only surprise is where things are starting to pick up. I saw Open Table’s reservations chart this week in Italy has picked up 50 percent in the two weeks they’ve been reopened. I would not have expected it would get back online that quickly. So, we’re looking for some silver linings and it will take a little while for us to see them here, particularly in the food and beverage industry. 

So you’ll see that volatility in the consumer data. The question will be when businesses are ready to resume capital spending, to resume investment projects towards the future. If certain projects are delayed for two quarters, that’s one thing. If they’re delayed for two years, that’s another. And so I believe the consumer’s going to get the bulk of the headline attention, but for an economist like me, I really am going to be far more focused on the supply side because I think that’s what determines economic health.

EICHER: Let’s talk about government efforts in the meantime. The House approved another $3 trillion aid package, but it’s not getting the same fast-track treatment the initial rescue bill received. What do you know about what’s likely on Capitol Hill?

BAHNSEN: Yeah, I mean, we knew that the House’s bill was dead on arrival and Pelosi knew it. They were never serious about passing it because if they were, they would have involved Senate lawmakers and the Department of Treasury in the process. So, it was always intended to be a political statement which is laying out a series of demands. But what it did was put a few markers out and ultimately I believe some of those things are going to end up being in the final bill. But I think that both sides are setting the stage to kind of negotiate what they want and the horse trading is going to get to be very expensive. Ironically, one of the things about her bill that I don’t think will hold up is the $3 trillion, but not because I think the final bill will be less, because I think the final bill will be more.

EICHER: OK, David, listener question. This is Byron Snapp. I’ll read it. “We look forward to David Bahnsen’s input each Monday. I would like to ask him as a Christian economist, what practical economic recovery path would you suggest were you Secretary of Treasury trying to get the economy through the crisis and up and running again?” 

So, obviously, hypothetical. But Secretary Bahnsen, have at it. You have about a minute.

BAHNSEN: Well, the problem with these types of questions are that I never know if I also got to be in charge of the economy for the last 20 years or if I’m dealing with the reality as it is because I don’t believe Christians should wave magic wands that ignore the context. And so it would not be feasible for me to come in and balance the budget in one day. 

But to try to give a more helpful answer that is principle-driven in the moment, my answer to the very thoughtful question is that I would really eagerly work for temporary emergency measures to be temporary and emergency—to not allow them to become entrenched into the future size of government, which is of course what has historically happened and what I very much fear will happen now. 

But if I could have any influence on keeping emergency temporary measures temporary and emergency, that’s what I would be focused on.

EICHER: David Bahnsen, financial analyst and adviser. Always great to talk with you. And, again, thank you so much for setting aside the time each week to explain.

BAHNSEN: Thank you, Nick. Appreciate it.

(AP Photo/Mark Lennihan, File) This Monday, July 15, 2013, file photo shows the American flag and Wall Street sign outside the New York Stock Exchange.

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