The guest commentary below was written by written by Mitchel Krause. This piece does not necessarily reflect the opinions of Hedgeye.
“The striking thing … the economic data have been surreally good!”
That quote comes from none other than Paul Krugman. That’s right ladies and gentlemen, the Nobel Laureate is back in the news, now being paraded from one mainstream financial network to the next spewing outright lies that go uncontested by his interviewer.
In a recent CNN interview, he had the audacity to open with the above quote, then continued:
“We can talk about surveys in which people seem to be relatively happy with their own financial situation or we can just look at behavior. People are out there with a lot of discretionary consumer spending, travel, hotels, restaurants … all of that is booming.”
Words mean very little when they can’t be supported by facts, which is why we ask, as always, what does the data suggest?
- Consumer spending: October retail sales decelerated 157 basis points from the previous month, which was reported on November 15 (BEFORE Krugman’s CNN interview, meaning anyone with intellectual integrity would know). The most recent Redbook weekly retail sales also decelerated significantly week over week, from +5.3% Y/Y to +3.1% Y/Y.
- Travel & hotels: Moving on, the only “travel” data that’s remained stable has been leisure travel, with both business travel and hotels also in the midst of a significant deceleration in data. As Hedgeye Gaming, Lodging and Leisure analyst Todd Jordan said November 28 on The Call @ Hedgeye: “Room rates are tracking lower in early 2024 versus 2023 … so the overall trend is still worse. The underlying fundamentals in corporate travel looks like they're getting worse and that's confirmed also by our review of corporate airline travel, where bookings are well below 2019 levels and still not getting any better, so I think the outlook remains pretty negative looking ahead for business-related hotels.”
- Restaurants: Traffic has been abysmal at best, as we noted last month: “The QSR (Quick Service Restaurants), has seen foot traffic DOWN for three sequential months. Per Hedgeye Restaurants analyst Howard Penny, “the first half of October saw a 445-basis point sequential decline” … while Open Table has shown a massive deceleration in reservations over the past six months.”
There is not a single word in Krugman’s interview that is backed by empirical data … still, he’s on parade right now; and you should really be asking yourselves why.
To suggest there is anything “good,” let alone “surreally good” in this economic data is unconscionable … and the only things that are “striking” about it, is how anyone who suggests as much can be considered an “expert” by anyone.
Current data is extremely concerning, and we’re calling it out, doing everything we can to get people to pay attention. Unfortunately, history also tells us, most people don’t care until they’re forced to care, and by then, it’s frequently too late!
Click here to read Mitchel's note in its entirety on the Other Side Asset Management website.
This is a Hedgeye guest contributor piece written by Mitchel Krause and reposted from his most recent monthly report. Krause is an industry veteran of nearly 28 years, where he’s seen the industry from the inside out. Nearly a decade of private wealth service, followed by just under seven years with an institutional group focused on banks and thrift stocks. He’s been managing discretionary money since 2015. His career began at, Ryan, Beck & Company in 1996, a boutique firm specializing in financials and municipal bonds, which was later bought by Stifel Financial Corp in 2007. He opened the doors to Other Side Asset Management in 2018 in an effort to tell the “other side” of the investing story to those willing to listen. He continues to manage discretionary assets while publishing these notes monthly. His archives are open to the public. Currently, he both works and resides in Raleigh, North Carolina.
Twitter handle: @OtherSide_AM
LinkedIn: Mitchel Krause