Post 218

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.


  • The first Paulitical Economy™ poll: Pollitical Economy.
  • More layoffs are being announced and job vacancies are falling.
  • Despite a continuing weak German economy, Brown Forman (Jack Daniels) sales there seem to be doing just fine.
  • McDonald’s is launching a new brand.
  • Soup sales are falling.
  • Over the last fifteen years GDP per capita (final spending per person) is up almost 100% in Ireland.
    • It’s down in Italy.
  • I’ve noticed more articles about the necessity of somehow getting governments to show at least some form of fiscal restraint: Good luck with that.
  • Higher interest rates are slowly but surely squeezing the economy.
    • Credit card debt and mortgage payments are rising.
  • Many in the real estate industry are demanding lower interest rates in order to drive already ridiculously expensive housing prices even higher.
    • Many economists are also recommending lower interest rates as it’s the usual remedy for a slowing economy.
    • I suspect that will be the eventual response by central banks but unfortunately the short-term salve will only make things worse down the road.


End of an Era

The Canadian edition of Reader’s Digest magazine has published its final edition.

  • The company cited:
    • Declining ad revenue
    • Higher costs
    • Changing reading habits.
  • I just checked-out their website ‘here’ which is pretty good.
    • They list their favourite Christmas movies of all time ‘here

And so, here’s the poll.

  • Email me your three favourite Christmas movies of all time and we’ll compile the results for the next post.
    • The results will be anonymous so don’t be shy. 
    • You might discover some new Christmas movies as I did going through the Reader’s Digest list.

Spotify Layoffs

Despite strong growth numbers, Spotify has announced that it is letting go 1,500 people or 17% of its staff.

  • Combined with earlier layoffs, the company has now let go around a quarter of its employees (FT).

The company continues to lose money.

  • From 2020 to 2022 the company lost a total of just over $1 billion.
  • Over the first nine months of this year the company lost $462 million.

Here is my post from a couple of weeks ago.

Spotify Up

Spotify 3-month results

  • Adjusted sales up 17%
    • They raised the monthly charge to US$9.99
  • Active users: 574 million
    • Up 26%
  • Premium subscribers: 226 million
    • Up 16%

German Economy Weak

Planned investment by German companies over the next two years has fallen.

  • Ifo Institute Munich net investment index:
    • March: 14.7
    • November: 2.2

Although the index for the business climate in Germany seems to be stabilising at low levels:

  • Pre-COVID: Around 100
  • Nov 2022: 86.9
  • Jun 2023: 88.7
  • Nov 2023: 87.3
    • But up for the third month in a row.    

Cutting Back On Bourbon

Brown-Forman makes alcoholic beverages.

  • It was founded in 1870 by George Garvin Brown in Kentucky.
  • Their website says it was the first company to sell whiskey in a sealed glass bottle.
  • George Forman (not the boxer) joined in 1890.
  • During prohibition from 1920 to 1933 (can you imagine?) they were given permission to bottle whiskey for “medicinal” purposes.
  • During World War II all of its plants were converted to make industrial alcohol which was used as a solvent.
  • At one point the company diversified into consumer durables and owned Hartmann luggage (sold in 2005 and now owned by Samsonite).
  • Their brands include:
  • Bourbon:
    • Jack Daniel’s
    • Woodford Reserve
  • Slane Irish Whiskey
  • Herradura Tequila
  • Sonoma Cutrer wine
  • They used to own Southern Comfort (1979-2011) but sold it to Sazerac Company.
  • They also recently sold Finlandia Vodka.

Announced their latest results:

  • Adjusted sales were down 1%.
  • Jack Daniel’s: Down 2%.

Six month adjusted sale by region:

  • US: Down 5%
  • Germany: Up 5%
  • Australia: Down 4%
  • UK: Down 9% (this is getting serious)
  • France: Down 3%
  • Canada: Flat
  • Emerging markets: Up 19%

They mentioned that the “challenging global environment is tempering our expectations.”

Toronto Area Home Listings Up Significantly From Last Year

According to the Toronto Regional Real Estate Board (TRREB).

  • Housing prices:
    • Jul (recent peak): $1,1961,101
    • Oct: $1,125,928
    • Nov: $1,082,179
      • Down 3.9% from the previous month
      • Down 9.5% from recent peak
      • Up 0.3% vs. November last year.
  • The number of homes sold in the Greater Toronto Area (GTA): 4,236.
    • Down 6% from November last year.
  • Total active listings are up 41%!
  • Average property days on the market (PDOM):
    • November 2022: 33
    • November 2023: 39

Realtors are hopeful that interest rates will start falling once more and start driving home prices higher.

  • Unfortunately, the math doesn’t work with the median income earner struggling to afford the median home.
  • As discussed many times in the past, interest rates are not the problem, home prices are and thus they need to fall.
    • Most of us already have significant unearned equity in our homes so falling house wealth is wealth we never deserved in the first place.
    • Unfortunately, for first-time buyers who bought in the last couple of years, they could end up in a negative equity.
      • However, there are things that can be done to help those with life-long equity losses on their homes.
      • But for speculators: no soup for you.
        • More in my book😊.

The Canadian Broadcasting Corporation (CBC) is eliminating 800 positions or over 10% of its workforce.

  • It’s facing a budget shortfall of $125 million next year due to:
    • Declining advertising revenue
    • Higher production costs
    • More digital competition.

New McDonald’s Brand

McDonald’s is launching a new restaurant brand called CosMc’s

  • It will be focused on beverages.
  • Beverages will come in “bold and unexpected flavor combinations, vibrant colors and functional boosts.”
    • Sour Cherry Energy Slush
    • Tropical Spiceade
    • S’mores Cold Brew
    • PM: How about a Chai Frappe Double Cheeseburger?
  • Food items will include:
    • Spicy Queso Sandwich
    • Savory Hash Brown Bites
    • Pretzel Bites
    • And a few McDonald’s classics like Egg McMuffins.
  • It will be all digital ordering with multiple drive through lanes and pickup windows: you will be told which window to drive to when your order is ready.
  • It won’t have dining room:
    • According to Circana, only 14% of fast-food meals were consumed in the dining room.

Price Over Volume

Campbell’s latest results:

  • Three-month adjusted sales: Down 1%
    • Price: Up 3%
    • Volume: Down 5%
  • Sales by division:
    • Meals (soups) & Beverages: Down 3%
      • Price: Up 2%
      • Volume: Down 6%
    • Snacks: Up 1%
      • Price: Up 5%
      • Volume: Down 4%

Maybe Campbell’s will do well if cities need to reopen soup kitchens.

Here is my post from December 2022: how quickly things can change.

PM: Campbell’s (Soup) owns the following brands:

  • Chunky
  • Cape Cod (chips)
  • Kettle (chips)
  • Pepperidge Farm
    • Goldfish: Launched in 1962
  • Prego
  • V8
  • Franco American: SpaghettiOs
  • Swanson (Just the broth business.  TV dinner business is owned by Conagra)
    • Frozen prepared meals have come a long way over the years.  My generation will remember those not so delicious Swanson TV dinners back in the 1970s.

The company was founded in 1869 with its first jar of ready to eat soup produced in 1895.

The red and white colours adopted for their tins of soup were inspired by Cornell’s (Ithaca, New York) red and white football team uniforms.

They began advertising on the radio in 1931

  • TV in 1951.

1962: Andy Warhol debut’s Campbell’s soup can paintings.  PM: Talk about souper advertising.

Results for the three months ending October:

  • Sales up 15%
    • Prices were up in the 15-18% range.
    • Volumes down around 1-2%.

Guinness Trumps Pasta

GDP per capita by country, 2007 vs. 2022 (constant 2015 USD):

Country20072022% Change
United States$54,300$62,867+16%
Italy$34,081$32,903-3% report ‘here’

Note that figures will vary depending on if one uses current or constant dollars or what year of current dollars, but the picture should tell a similar story regardless.

Living In The Dark

FT journalist Janan Ganesh writes about how “Voters don’t want to hear the fiscal truth” i.e. that people benefit far more from entitlement programs than they contribute in taxes.

  • True, but it’s because governments and central banks have for years conditioned voters into believing that you “can” have your cake and eat it too.
    • It’s how you get elected.
  • Of course, not everyone can have their cake and eat it too.
    • Instead, people have been eating other peoples’ cake.
  • And now the chickens are coming home to roost.

Consumers Stretched

Buy Now Pay Later spending online in the US was up 17% in November (Adobe Analytics).


Inflation in developed economies (OECD):

  • Oct 2022: 10.7%
  • Sep 2023: 6.2%
  • Oct 2023: 5.6%

Food Prices Still Rising

According to a report from Canada’s Food Price Report:

  • They expect grocery prices to rise in 2024 by 2.5-4.5%.

Here are their predictions and outcomes from the prior two years:


  • Prediction: 5-7%
  • Outcome: 10.3%


  • Prediction: 5-7%
  • Outcome: 5.9%

US Job Market Normalising?

US job openings:

  • October 2022: 10.5 million
  • September 2023: 9.6 million
  • October 2023: 8.7 million
    • The lowest number in two and a half years.

Higher Interest Rates Taking Their Toll

Consumer debt in Canada (Equifax) in the 3Q 2023:

  • Up over $80 billion from last year.
  • Now at $2.4 trillion

Of that, credit card debt was up by 16%.

  • Credit card balances now at $113 billion.
  • The average credit card balance:
    • 3Q 2022: $3,727
    • 3Q 2023 $4,119
      • Up 10.5%

The percentage of borrowers who missed at least one payment:

  • During the pandemic: 3.2%
  • 3Q 2023 4.0%

They said that:

  • “Mortgage holders are starting to miss payments, particularly first-time homebuyers and those who renewed their mortgages during the peak interest rate periods over the last 12 months.”
  • “With many upcoming mortgage renewals, consumers need to prepare for potential payment shocks.”

Overall delinquency rates are still at low levels, but are rising quickly.

First time home buyers in Ontario and BC have mortgage payments in excess of $3,000.

Canada delinquency rate: 1.20%

  • Up 29% from last year

Golf Balls

Golf authorities in the US are taking steps to reduce the distance a golf ball will travel.

  • Current rule:
    • A ball that is hit with a club at a speed of 120 miles per hour should travel 317 yards.
      • So that’s my problem.
    • The new rule will increase the club head speed to 125 miles per hour for the same distance.
  • The rule is expected to come into effect in 2028 for the pros: 2030 for the rest of us.
    • I’m stocking up on the old balls.

Office Space For Let

San Francisco Office Vacancy Rate (CoStar Group):

  • 4Q 2019: 5%
  • Nov 2023: 25%

Poverty Rate

WSJ Op-Ed by Phil Gramm and John Early

  • The official poverty rate in the US: 11.6%
  • However, there are 88 different social benefits that policymakers don’t include in income when determining the poverty rate.
  • When all taxpayer funded benefits are counted, the poverty rate in the US is 2.5%
    • Of course 2.5% is still over 8 million people living in poverty.
  • According to the Census American Housing Survey:
    • The percentage of poor households that:
      • Own a home with an average of three bedrooms: 42%
        • Have air conditioning: 80%

Financial Ructions

Commercial Real Estate Creaking

According to Trepp:

  • The delinquency rate on office property Commercial Mortgage-Backed Securities (CMBS):
    • Dec 2022: 1.6%
    • Nov 2023: 6.1% 
  • The overall CMBS delinquency rate which includes retail, industrial, multi-family etc.:
    • Dec 2022: 3.0%
    • Nov 2023: 4.4%

Money Market Funds Killing It

Money market fund total just reached a new record (Investment Company Institute): $5.84 trillion.

  • According to FRED:
  • Money market funds yields
  • Jun 2021: 0.05%
    • PM: That’s how stupid things were.
  • Nov 2023: 5.33%

Not Banking On It

According to Boston Consulting Group:

  • The number of European banks trading below book cost: 73%
  • PM: And I would assume that in many cases that book value would be suspect.

China Getting Worse?

Moody’s changed its outlook for China’s government credit rating from stable to negative.

Canadian Economy Falling?

In a Globe and Mail opinion piece David Rosenberg makes the following points:

  • GDP growth in Canada is slowing and the last three-month number was 0.5%.
  • However, because of strong immigration pushing up the population, the per capita (person) GDP growth number has been negative over the last twelve months i.e. per person final spending has fallen -2.2%.
  • Real Gross Domestic Income has contracted four of the past five quarters.
  • “Inept government policy” is responsible for fostering a housing and consumer debt boom.
    • This has contributed to declining productivity in Canada:
      • It’s down five quarters in a row.
  • Household debt to income is 172%
    • And because one third of Canadians have no debt that aggregate number for those who actually have debt is higher.
      • PM: For instance, according to Statistics Canada, in 2022 the debt to income ratio for core working-age households (35-44 years) was well over 200%.
    • In 1990 it was 86% (Statistics Canada)
  • Credit growth in Canada is the weakest it’s been in two decades.
  • He criticizes the Bank of Canada for keeping interest rates where they are and that he expects them to fall significantly in 2024.
    • PM: I usually agree with most of what Rosenberg has to say, but as you might expect, on driving interest rates down to protect asset prices and encourage even more borrowing on top of record debt, I disagree.
      • This policy is what has gotten us to this perilous situation in the first place as policymakers focus on the “neutral” rate of interest which fosters spending without letting inflation get out of control.
        • I.e. economy slows so lower interest rates so people can service more debt and spend.
    • Which also drives asset prices higher unfairly enriching asset owners at the expense of the next generation.
      • Manipulating interest rates below their “natural” rate and distorting price discovery fosters misallocation of capital and lowers productivity growth, which is what we have been experiencing for years.
        • The disease was not raising interest rates but previously keeping them so low for so long.
          • And then effectively forcing people to overpay for homes that they could only afford with a productivity-destroying zero interest rate.
        • Lower interest rates reduce the amount of stuff that otherwise would have been produced.
          • Combined with a higher supply of money it results in inflation than there otherwise should be.
          • In fact, an unhampered price discovery mechanism should result in “good” deflation.
        • Where I agree with him is that there will be more pain if the BOC doesn’t drop rates in response to a slowdown.  But if they do drop rates to ease today’s pain it will result in significantly “more” pain in the future.
          • Over the past fifteen years, there were numerous times the BOC could have done the right thing (small pain in the short-term) to benefit the economy in the long-term, but, like all central bankers, they chose the no pain, higher asset price route at the expense of the future health of the economy.
          • It’s now the longer term and the pain and math are finally becoming glaringly obvious for policymakers and there is no easy way out.  They can delay it but it will only make things worse in the future.

Government Finally Cracking Down

The WSJ reports that the IRS is cracking down on claims for the Employee Retention Credit (ERC).

  • This credit was put in place in 2020 to encourage companies to not lay employees off.
  • So far, the credit has cost the government at least $230 billion.
  • The IRS is investigating what it believes to be numerous fraudulent claims.
  • The IRS website warns people of unscrupulous promoters who contact people to help them apply for the credit.
  • They have already mailed 20,000 “disallowance” letters.
  • The IRS also put in place a plan for those still waiting to receive funds for their claim: it allows people who think they may have concerns about the “accuracy” of their claim to withdraw their claim and not face penalties.

Disclaimer: Note that Paulitical™ Economy should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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