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Weekly eLetter 8/7/2020 — Stimulus Sincerely Stuck? Seriously?

Friday morning brought the good news that, at least in general terms, the US economy continues to make progress in its attempts to recover from the impact of the Coronavirus. The Nonfarm Jobs Report from the BLS over-performed estimates, showing about 200,000 more jobs created than had been analyst’s forecasts. Additionally, the unemployment rate was a bit better than expected: 10.2% vs. the forecasted 10.5%. Still, that only drops the unemployed to a very ugly 16 million folks out of work.

The concept of ‘better than expected’ or ‘worse than expected’ are big factors in what drives markets, so the better than expected jobs report should have provided a boost to all of the major indexes this morning. But, hold on; there’s more.

It is important to keep in mind that the economic impact of the pandemic operates on more than one level. Of course, individuals are personally affected by the loss of a job or loss of hours and other factors but there is also the collective damage to the economy as a whole.

We often speak of liquidity in the markets and one form of that is analogous to the oil in your car’s engine. Adding liquidity to the markets injects that same liquidity into the economy. That may be necessary at times when liquidity is falling. If that oil falls below a certain point, the economy, like your engine, may seize and you will go no further.

Today in Washington, our politicians are telling us that they are working very hard to overcome their differences of opinion on how best to pass the next round of economic stimulus. We find it very hard to accept their offered sincerity at face value. Watching the blame-casting and finger-pointing is terribly frustrating for us and probably for you too. Checking the oil frequently is a good idea but, do we really need all these dipsticks?

The bottom-line question is ‘what will it take to cure the constipation?’ As it is so often in DC, things will finally move forward once the politicians run out of ways to make the lack of progress appear to be the fault of ‘the other guys’. There are only a handful of possible outcomes. Cnet has a pretty good piece today that explains what they are. You can find it here:

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