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It’s Worse Than it Looks: Beneath the Surface the Bottom is Falling Out, and People are Jumping out of Windows
David Haggith

Surveying just the news that started this year in The Daily Doom, things look bad for the US economy. Worse still, if you dig beneath the few rosy headlines that did greet the year in lighter tones, the bottom falls out quickly, as it does when stepping out of a high-rise window.

This weekend, for example, I’m going to be working on a deep dive in one of my special posts for patrons into the confusing swirl of conflicting employment news that sent stocks soaring skyward today. It was really far shakier than the market wants to believe it heard. (Later this month, I’ll be giving my predictions for the upcoming year in another Patron Post.)

With the ghost of Christmas past, the Santa Clause rally fizzled into what looked like stocks were simply trying to edge upward. Stocks, finally, took a leap today; but that bolt upward was expected by many prognosticators I read on the unsustainable basis that there were a lot of losses intentionally captured during December by investors who had plenty of losses to capture from last year’s stock-market crash in order to, at least, benefit from the tax write-offs. That usually results in a quick, albeit short, rebound as the surface recoils to normal after the losses have been taken off.

Job flops

However, the market’s moves, particularly in today’s rebound, looked desperate when you consider how the market separated out a single thread of bad-news-is-good-news as the trigger for its leap. The market glommed onto a decrease in wage GAINS, because it means one of the forces driving inflation is fading to where the Fed will stop tightening the economy sooner. 

Average hourly earnings rose 0.3% for the month and increased 4.6% from a year ago. The respective estimates were for growth of 0.4% and 5%.


However, the market took that leap even though the 0.1% dip below expectations for the growth rate was far from being as significant as the the manifold ways the last two days of employment reports prove the Fed will have to tightening even harder for longer. In particular …

Hiring exceeded estimates for the month and unemployment fell to the lowest in decades.


Those are intensely strong indicators that the Fed will have to tighten even harder because it is getting nowhere in reducing the inflationary effects of a tight labor market.

“A new 53-year low in the unemployment rate is a real problem, suggesting the Fed made zero progress toward relieving labor market strain in 2022.”

No kidding! Yet, the market climbed desperately up the thread of hope provided by the notion that a decrease in the rate of wage growth meant big progress that would allow the Fed to back off of its inflation-fighting agenda. (Not a chance as will be shown when I dig beneath the surface of those numbers for my patrons!)

That all got twisted into what the market wanted to hear in this confused fashion:

“A lower unemployment rate [indicating the Fed will have to tighten much harder] and weaker average hourly earnings growth [indicating the Fed will be able to back off from tightening] is certainly going to get equity market bulls’ attention. Indeed, expectations for a soft landing in the economy have likely been boosted in light of today’s jobs report. Yet, with the unemployment rate back to the historic low of 3.5%, how realistic is it to expect wage growth to move meaningfully lower? The Fed will likely be skeptical.”

I would say there was no realism at all in today’ convoluted interpretation of the news that immediately sent stocks soaring all day.

Even CNBC anchor Rick Santelli gushed over the December jobs report, calling it “historically unbelievably good!

So, it was beyond absurd to think news today meant the Fed would stop tightening sooner. (Of course, it is unbelievably good, but for reasons no one seems to understand, including the Fed. Sere here and here.)

The start of 2023 is a tipping point for a deeper dive

For now, let’s ignore the stock market’s unreasonable gyrations and look at where we begin the year economically based on this week’s news alone because the truth is not at all as good as the jobs reports and unemployment numbers indicate. After a short reprieve in the market due to the rebound from taking losses finding a narrative it could use, the economic scenario says we have ample causes for going back to a falling market.

I want to start with a nice recap of where the economy is by Michael Snyder, who laid out “11 Signs That The Economic “Tipping Point” That Everyone Has Been Waiting For Has Now Arrived.” Here is a snapshot summary of his list:

    1. U.S. manufacturing is declining at the fastest pace we have seen since the early days of the COVID pandemic.
    2. U.S. services PMI has now fallen for sixth months in a row.
    3. We just witnessed the largest one day drop in the Baltic Dry Index since 1984 [which indicates shipping of bulk resources is slowing way down].
    4. Thanks to rapidly falling imports [due to dying demand], we just witnessed the largest monthly decline in the trade deficit since the last financial crisis.
    5. In 2022, U.S. auto sales were the lowest that we have seen for a full year in more than a decade.
    6. The average rate on a 30-year, fixed-rate mortgage is more than twice as high as it was this time last year.
    7. Sales of apartments in Manhattan were 28.5 percent lower in the fourth quarter of 2022 than they were in the fourth quarter of 2021.
    8. Existing home sales in the United States have fallen for 10 months in a row and are now down by more than a third since one year ago.
    9. Bed Bath & Beyond is warning that the company is literally on the verge of declaring bankruptcy.
    10. Amazon has decided to lay off approximately 18,000 employees.
    11. Overall, the tech industry has already laid off more than 150,000 workers over the last year.

The two biggest factors that emerge there are the sharp fall-off in the US economy’s main driver — housing — and in retail, resulting in layoffs and even a likely bankruptcy in a once strong retailer that has struggled due, it claims, primarily to Covid-related shortages and falling consumer demand under higher prices and tighter margins. So, let’s explore in more detail the retail crash in both online and brick-and-mortar as exemplified by Amazon and BB&B.

Digging deeper into retail

That is a good whirlwind list to which I will add the following observation about the retail scenario:

Retail sales in the US just experienced their third-worst week in history!” You may have actually heard news that touted holiday retail sales as being strong. I know I did, but that was a veiled lie that requires digging deeper. As I’ve noted before, retails sales are measured in dollars. The growth in sales was due entirely to inflation in prices/devaluation of the dollar. Factor out the hot inflation that made retail seem good year-over-year, and you have a REAL decline in sales during the holiday season.

One article in this morning’s Daily Doom noted the main reasons for BB&B’s share-crushing bankruptcy warning:

Struggling Bed Bath & Beyond warned on Thursday that there’s substantial doubt about the company’s ability to continue as a “going concern” as sales continue to drop and it struggles to attract shoppers…. Shares fell 30% to $1.69 on the news.

The company’s assessment came as its dismal performance continued through the holiday season….

The company’s CEO and president Sue Gove blamed the poor performance on inventory constraints and reduced credit limits that resulted in shortages of merchandise on the shelves.

New York Post

Just yesterday, an article in The Daily Doom reported,

The retailer, citing worse-than-expected sales, issued a “going concern” warning that in the upcoming months it likely will not have the cash to cover expenses,such as lease agreements or payments to suppliers. Bed Bath said it is exploring financial options, such as restructuring, seeking additional capital or selling assets, in addition to a potential bankruptcy.


That comes after a horrible time since the Covidcrisis for BB&B, after which it announced back in August it would close 150 stores and slash its workforce by 20% in order to massively reduce costs. It estimated those moves to save a quarter of a billion dollars. Now it’s digging deeper. Unfortunately, it also needs to borrow more money, and that comes at a much higher cost, thanks to the Fed’s tightening. So, one way the Fed crimps inflation is by helping to crush retailers out if existence. This isn’t entirely the Fed. It is also the shortages and inflation’s impact on retail; but what I said early last year would become true for zombie companies is now arriving.

BB&B’s chief financial officer was one of the early ones to literally jump out of a Manhattan window and end his life this fall. That happened shortly after its CEO got ousted. So, yes, we are back to those kinds of days where a formerly flourishing company has been hit so hard, particularly by the Covidcrisis and then the Fed’s raising of its interest on credit that was floating the struggling company along, to where executives are leaping out windows, and now retail publications are putting the toe tag on it:

Neil Saunders, managing director of GlobalData Retail, wrote in a report Thursday that Bed Bath & Beyond is “too far gone to be saved in its present form.”

NY Post

The company made its own branding missteps but particularly struggled along as a borderline zombie corporation during the Covid lockdowns and then the supply shortages that came afterward, and now the debt that floated it through those times is no longer sustainable. That its bankruptcy warning hit as a shock can be seen in the 30% one-day cliff-fall its stocks took. But that is the way of zombie companies that I told Patrons early last year we’d be seeing down the road: they look fine on the surface to most people until the ugliness underneath breaks through when they can no longer float on the surface tension of the debt that is supporting their image of success. Suddenly we see the monstrosity they became:

The bursting bond bubble my include a zombie apocalypse….

While the Fed brought up the concern that their cheap finance may cause a rise in zombie firms, the number of zombie firms has also been found to rise during periods of high inflation because businesses with tight margins struggle more to survive….

During high inflation, most businesses try to absorb some of the producer costs of inflation and not pass them on in order to maintain market share. Zombie companies, because they have razor-thin profit margins (if any at all), are the least able to do this and so are more likely to lose market share by having to raise their prices above their competitors. Similarly, zombie corporations are more likely [than other corporations] to go bankrupt during times of declining GDP….

“Although not yet insolvent, these businesses are left to shamble along aimlessly, not earning enough to reinvest in the business but still turning over a sufficient amount to pay off debts. Now, as COVID restrictions lift and economies reopen, these undead firms could prove to be a curse for hopes of a strong economic recovery…. Government support schemes, low interest rates and access to cheap credit has helped to keep many of these companies in a state of suspended animation. It has also caused the number of these zombie businesses to soar.

The Everything Bubble Bust Pt. 2: Zombie Apocalypse

And, so the Zombie Apocalypse may be now stumbling toward us as interest rates hit a level that drives the nail into their coffins with BB&B being one of the first leaders of the zombie horde. 

To understand how news of surface-level rises in retail can actually mask sales that are dropping, one has to look at inflation. Inflation forces one to look beneath the surface of all reports these days that are measured in dollars to see how much of what is being reported is just inflation that hasn’t been adjusted out of the numbers. The fact is, retailers not only sold fewer items, but they made a lot less money (in profits) because they had to offer a lot more incentives to get those sales.

You have to dive beneath the surface of the following kinds of rosy reports to see what is really happening: 

U.S. online spending during the 2022 holiday season rose by a better-than-expected 3.5%, a report by Adobe Analytics showed, as retailers used hefty discounts to lure inflation-weary consumers into spending on everything from toys to electronics.

Shoppers spent a record $211.7 billion online over the holiday season.


Yeah, they spent a record number of dollars because everything is so freaking expensive with prices at record highs. But, it’s that part about the hefty discounts luring inflation-weary consumers that one must digest to know what the headlines mean. Hefty discounts mean these record sales brought lower total profits, and we see inflation hinted at, which should be a reminder that those sales, measured in dollars, did not amount to as many items sold; but the article doesn’t think to spell that out for you.

That is just not the kind of nuanced thinking the mainstream media cares to spend time on.

The article DOES say,

While U.S. online holiday sales rose, it grew at the slowest pace as consumers felt the brunt of rising prices.

However, it doesn’t say that sales did not rise AT ALL, but actually FELL, if you factor that inflation back out of the prices sales are measured in — the same inflation that made even the surface-level (unadjusted) growth “slow” as consumers felt the brunt. What we really had was slow HEADLINE growth, which translated to sharply declining REAL growth because consumers dialed back purchase. On top of that, retailers made lower margins on what little they did sell because they had to offer steep price discounts from the manufacturers’ highly inflated price recommendations. This all means they may have actually taken losses to get that higher dollar value in total sales. (“We’re losing money on every item sold, but we’re making it up on volume!”)

So, the Zero Hedge headline I used to lead off this section caught the true news accurately. It was the third-worst week for retail in history!

Cryptocrisis continues to expand

Cryptocurrencies saw a global loss of over $3-trillion last year, and in the past week’s Daily Doom one of the largest crypto banks, Silvergate, was reported to have seen day-after-day massive losses (well over 40% down in share values) due to an equally massive (40%) stack of withdrawals from scared customers trying to run from the bank with as much of their money as they can still get their hands on.

That is all money that simply evaporated. People took their Fed bucks and exchanged them for crypto bucks, and the crypto bucks just disappeared. They just got written off. Yet, the diehards die hard:

“I do think that there still will be dinner table conversations around crypto,” Valentine said. “For one thing, people still have a fear of missing out.

Roll Call

You bet there will be. Lots of conversation about the dizzying losses, but “fear of missing out?” Missing out at this point on what? Until the dust settles, I think the only thing one misses out on is more losses. Crypto is going through something like the huge compression that took place in the auto industry in the last century as many manufacturers went out of business and the rest got conglomerated into the “big three.” Eventually, there will be a few top-dog survivors in crypto, too. Maybe this year will see some fear of missing out on great fire-sale value. Well, just be careful you’re not snarfing up a lot of Studebakercoin.

And guess what was banked in all that crypto that vanished when the Fed started tightening the dollar? A goodly amount of those stimulus checks that made consumers so flush during our first Covid year.

According to a December report from the JPMorgan Chase Institute, the number of people who transferred funds into a crypto-related account tripled during the pandemic, rising from 3 percent of the population in 2020 to 13 percent in June 2022. 

The cryptocrash is a lesson in contagion — how one company like Terra can start a landslide among other big and small companies. Eventually, all that downflow causes a major slab of the mountain, like Ponzi FTX, to slide. FTX then slides into Silvergate, and now Silvergate is falling off a cliff and laying off 40% of its workforce. That’s a lot of forties for Silvergate: 40% withdrawals becoming a 40% loss in stock value this past week, resulting in a 40% cut in employees.

Yet, those are just the recent big plunge. Overall, Silvergate’s stock is down 95% due to the entire crypto crash bringing down values of all crypto companies because you see, on an individual company basis, economic reality does impact stocks a lot. Silvergate has gone from a high of $222 per share to a present value of about $17 all due to real economics:

Is that low now a bargain-basement buy? Well, not if you sink a wad into it and it drops to becoming a penny stock, as could easily happen. (A penny stock, by my definition, is a stock selling at under a buck a share, but the common definition (adjusting for inflation, I guess ; ) is under $5 per share.) Even at this low price, a drop from $17 to a penny stock means you’ll lose almost all of your money. So, beware the Studebaker stocks out there because you may be sinking your money into a dirt-cheap company that no longer exists in a year. Better be great at picking the winners if you’re going to try to capitalize on those basement bargains.

Wolf Richter gives a detailed rundown on the collapse of Studegate (excuse me, Silvergate) if you want to read a lot more in-depth detail on that one.

The Covid comeback

Covid returned globally with a vengeance over the holidays, particularly due to China ditching its Zero-Covid policy and, once again, exporting Covid all over the world on airliners:

Sean Lin, a virologist and former lab director at the viral disease branch of the Walter Reed Army Institute of Research, said that the Chinese Communist Party’s (CCP) opening up of the country is actually a strategy to get everyone infected not only within China, but around the world.

“When they can’t control the outbreak, they push it to the whole world. Just like when COVID first broke out in Wuhan, people who had been infected in Wuhan were allowed to travel around the world. The strategy is the same now as before,” he said….

It is extremely irresponsible for the CCP to let the people out of the country which is a huge epidemic area. Put another way, it has a very treacherous purpose and is very malicious.”

Zero Hedge

China, in its desire to make sure it is not hurt economically any more by Covid than the rest of the world, has even stated it will retaliate (didn’t say how) against any nation that bars it citizens from flying into those nations — never mind they are intentionally not even being tested before being allowed on aircraft and, even as The Daily Doom reported, Chinese hospitals are now overflowing once again with Covid patients (and China doesn’t use the mRNA vaccines, so it is not due to that kind of vaccine), and the WHO says the new variant that is spreading is the most contagious form of Covid so far. 

China’s Zero-Covid quarantines all over the nation made the situation worse. By literally screwing people into their homes (to the point they couldn’t even escape out the doors or windows in a fire), China assured its populace developed no naturally enhanced immunity to Covid. They have also stayed with traditional vaccines that are about 60% effective (probably as good as the mRNA vaxxes at this point). Opening the doors widely and immediately after a year or more of total isolation assures widespread infection in a populace with little naturally developed immunity.

So, thank you once again, China, for doing your best to reinfect the entire world with yet-again new strains of the disease you largely created! We know from experience what the economic impacts of Covid can be if it makes another global resurgence, though much of the impact depends on human responses.

Big banks are warning of a big bust

Not just a few banks, but many major banks, are now warning of a recession dead ahead for the US with millions of additional Americans falling into unemployment. (Never mind that we are already technically in a recession; we’re dealing with the news of the past week as it was.)

Shadowstats, which measures inflation the way the US did back in the 80s, still reports inflation comparable to the 80s at 15.2%. That, along with today’s job numbers that showed the Fed is losing its battle to bring down jobs as a curb to inflation, means the Fed has a lot more fighting to do! That, in turn means the stock market has a fantasy focus. (But I’ll save the deep dive into the job numbers for my Patron Post. Suffice it to say here, the labor market isn’t getting tight in the way the Fed wants to see.)

Frustrated by how sticky high inflation has remained despite the rate boosts, Fed officials have pledged to keep raising rates and keep them high until inflation recedes to near the Fed’s 2 percent target, as measured by the core Personal Consumption Expenditures (PCE) price index….

In their most recent summary of economic projections, Fed officials said they expect the terminal Fed Funds rate—meaning the highest level before it hits a ceiling and later falls—to come in at 5.1 percent.

Zero Hedge

The Fed’s goal is to crush down on inflation by pushing unemployment up to about 4.5%, but in today’s report, unemployment , after months of Fed Fu fighting, remains solidly anchored at an extremely low 3.5%, completely defying the Fed’s wishes. So, the stock market, today was a lunatic. No surprise there.

Most of the economists surveyed by The Wall Street Journal think unemployment will get even worse and peak at more than 5 percent.

An unemployment rate that high would mean several million Americans losing their jobs.

10 major investment banks … are leaning pessimistic, with one of them (Barclays) predicting that this year “will be a long, hard slog….”

The worst is yet to come.

Now consider the following, if Covid rises, it will shut down more production and shipping, particularly in China, as it has in the past, creating more shortages and more inflation. Meanwhile, if the Fed succeeds in eliminating jobs in an economy where the total number of jobs is already well below the pre-Covid trend line and where the labor market already cannot supply enough laborers to fill those remaining jobs, that will mean further reduced production with more shortages and, so, more inflation. The latter is almost a no-brainer to the thinking man or woman who sees an economy that cannot produce enough labor to avoid shortages, resulting in GDP that has already languished for, at least, half of the past year (longer by my accounting).

When the Covid lockdowns ended,

Idled factories were unable to ratchet up production fast enough to meet the jump in demand, an inflationary dynamic made worse by labor shortages as more people who were close to retirement left the workforce permanently amid the pandemic and as generous stimulus checks kept others from seeking employment.

The Fed doesn’t realize it, but tightening up an already underproducing labor market is likely to have the backlash effect of worsening shortages and, therefore, ultimately increasing inflation due to the scarcity premium those shortages place on goods and services down the road.

Corporate insiders agree with the big banks

One good indicator of where the economy is headed is where corporate leaders are placing their own money. Are they betting on their own businesses with stock buybacks and personal purchases of their own companies shares?

In a word, “No.”

Insider sentiment, measured by the trailing three-month average ratio of companies whose executives or directors have been buying stock versus selling, has dropped for six consecutive months, according to data from That is the longest such decline in almost two years.


Two years isn’t very far back, but you have to consider that only two years ago most of the world participated in the largest global economic closure experiment in history. It was a major disaster that is still plaguing us, and it abruptly cut off share buybacks, in part due to buyback regulation on companies getting massive government bailouts.

The scale of buyback reduction today shows corporate leaders are reacting to present circumstances in much the same way they did back in the last economic crash, which included a stock crash.

Insiders typically have greater insight on the business outlook, and the fact that they haven’t been scooping up their own stocks as the market tumbles suggests they believe that it might not have bottomed just yet.

The S&P ended 2022 resting on its 20%-down, bear-market threshold. 

The ratio of insiders who are buying their stocks to those who are selling their stocks has been falling for months now. Since stock buybacks were the main driver in the long bull market of the last decade, the scaling back of buybacks to such a degree does not bode well for the market. 

If insiders remain on the sidelines, that could portend more trouble ahead for the stock market, strategists say.

“The thing that stands out right now is the lack of buying even though prices have come down so much,” said Nejat Seyhun, a finance professor at the University of Michigan who studies corporate-insider activity….

In both November and December, shares of nearly twice as many companies were sold by insiders as they were bought….

“Sentiment is generally negative, and insiders are no less subject to that,” Mr. Hamilton said. “People have suffered losses, and the natural psychology kicks in that makes them reluctant to buy when the news is bad and prices have gotten cheap.”

So major banks are expecting a bigger downshift to come. So are the top dogs among corporate insiders. And buybacks are dwindling significantly, as I said earlier this year, we could expect them to in this kind of climate.

Yet, while sentiment is sinking, we haven’t gotten to that point of all-out terror where insiders and big banksters believe we are near a bottom. They are, instead, expecting worse to come. So, there is plenty of room to fall. My own predictions for my Patrons later this month will lay out what I believe that will entail. In the meantime, The Daily Doom will continue to track this ongoing economic catastrophe because that is what this truly is as will become more apparent over time, just as it did in 2022. The forces of gravity are still hard at work, taking us into a deeper dive.

(Nearly all articles used in this report were carried in this week’s Daily Doom.)



Seeing the Great Recession Before it Hit

My path to writing this blog began as a personal journey. Prior to the start of this so-called “Great Recession,” my ex-wife had a family home that was an inheritance from her mother. I worked as a property manger at the time, and near the end of 2007, I could tell from rumblings in the industry that the U.S. housing market was on the verge of catastrophic collapse. I urged her to press her brothers to sell the family home before prices dropped. The house went on the market and sold right away — and just three months before Bear-Stearns and others crashed, taking the U.S. housing market down for the tumble. Her family sold at the peak of the market.

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