…there had to be a point where the value of the Wall St economy surpassed the value of the Main St economy… Part I Here

We now look forward, and consider the question: How would the multinational underwriters, the multinational financial systems, reset all transactional tables (the bookkeeping systems underneath the valuation) if the U.S. stock market was ever forced to re-value economic nationalism over multinational globalism?

To first answer the “how” question, we must visit the “why” question. Why would the multinational financial underwriters want to reset their valuations?

Obviously, the global financial system does not act altruistically. What would motivate the global wealth valuation authority (various market investment indexes) to want, or need, a reset.

The answer to the “why” question might not be as challenging as it appears.

First, there has been a seismic shift in how the world looks at the economic exploitation of multinational systems, or globalism.  See Bernie Sanders?  See those yellow vests in France?  See what happened with the U.K. Brexit referendum?  See the shrinking EU influence?  See the open/public confrontation and push-back against China? See Trump? All examples are consequences of the rise of economic nationalism.

Secondly, the original Wall Street corporate motive (during decades of mergers and acquisitions) to shift product manufacturing to Southeast Asia (ASEAN nations) was driven by a lower cost of overall business, higher profit margins and greed.

As a direct outcome economic wealth was shifted from the U.S. to ASEAN nations, and particularly China. Low wages, low regulation, cheap operational costs, incentives and subsidies from Asia equals cheap TV’s, sneakers, furniture and durable goods.

Even with high fuel prices and overseas shipping costs, there was a big difference between U.S. and ASEAN manufacturing costs.  As hundreds of U.S. Wall Street multinationals chased profits the rust-belt was created.

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A very big picture discussion requires a considerable baseline.

The stock market is not the U.S. economy; the stock market is an investment instrument that determines valuations of economic activity company by company. The valuation is considerably arbitrary, based on the determinations of the arbiters (investors). This is empirically true.

However, that said, how would the multinational underwriters, the multinational financial systems, reset all transactional tables (the bookkeeping systems underneath the valuation) …if the U.S. stock market was every forced to re-value economic nationalism over multinational globalism?    Enter “Coronavirus”.

Four years ago CTH first explained a new way to look at the U.S. economic system and how Main Street was/is disconnected from Wall Street.  We presented a metaphor to explain. Before going deeper into the discussion of tomorrow; and at the request of several people who now accept the era of “deglobalization” is upon us,  I first present that prior reference & then will use this as the baseline to describe what could come next.

There is a key phrase at the fulcrum of everything past:

…there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).

What we are going to outline in part II is the possibility what happens when this natural truism is reversed.  The objective is to answer: How, specifically would Wall Street reset its evaluative systems if Main Street once again emerged as the priority?

But first, a baseline revisit is needed.

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Earlier today President Trump announced he was invoking sections of the Defense Product Act to help mitigate COVID-19 (Chinese Coronavirus) in the U.S.  The act empowers the government with greater authority to control specific sectors of the U.S. economy, and specific industries, needed to respond to national emergency needs.

The three main components of the Defense Production Act include:

♦ Companies are required to accept and prioritize contracts from the government and to prioritize “materials, services, and facilities to promote the national defense or to maximize domestic energy supplies.” While this provision has historically been used to ramp up military production, in the midst of the COVID19 pandemic the act will be used for medical supplies.

♦ The second provision in the act provides financial measures, such as loans, loan guarantees, purchases, and purchase commitments, to speed up the production of materials “needed to support national defense and homeland security procurement requirements.”

♦ The act also addresses voluntary agreements – or what the government says is “an association of private interests, approved by the Government to plan and coordinate actions in support of the national defense.” The proviso permits business competitors to work together to plan and coordinate measures to increase the supply of materials as directed by the U.S. government.

Immediately after invoking the act, President Trump signed an executive order to prioritize Health and Medical resources (masks, respirators, medical equipment).

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This is a big sector hit to the U.S. economy.  All of the major U.S. auto manufacturers have agreed to shut down all production facilities, through March 30th, in the latest thunder-shock to the economy.

DETROIT – Ford Motor Co., General Motors and Fiat-Chrysler will close their plants due to the coronavirus (COVID-19) outbreak.

Ford said in a statement Wednesday that its U.S., Canadian and Mexican manufacturing facilities will be halted after Thursday evening’s shifts through March 30 to “thoroughly clean and sanitize the company’s plants.”

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White House trade adviser Peter Navarro outlines some of the ongoing supply chain initiatives to meet ongoing demands of the corovirus effort.  Navarro highlights the cooperation between US government and private enterprise.  WATCH:

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Earlier today President Trump met with executives from the U.S. tourism industry to discuss how their operation are impacted by the various COVID-19 mitigation efforts.

Participants included: Roger Dow, President & CEO, Travel Association; Chip Rogers, President & CEO, American Hotel & Lodging Association (AHLA); Jon Bortz, President and CEO, Pebblebrook Hotel Trust and AHLA Chairman; Elie Maalouf, President, The Americas, Intercontinental Hotels Group (IHG); Christopher Nassetta, President & CEO, Hilton; Arne Sorenson, President & CEO, Marriott International; Richard Bates, EVP, Disney; Mark Hoplamazian, President & CEO, Hyatt Hotels Corporation; John Sprouls, Chief Administrative Officer, Universal Parks and Resorts; Patrick Pacious, President and CEO, Choice Hotels International; David Kong, CEO, Best Western Hotels and Resorts; Jim Murren, President & CEO, MGM  [Video and Transcript Below]

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[Transcript] – THE PRESIDENT: Well, thank you very much. We have the tourism industry executives, the biggest anywhere in the world. These are the great ones, and they’re going to say a couple of little words pretty soon, I think. We’ll talk about their company quickly and the number of employees and what’s happened since the Chinese virus came about. And they’ll be discussing that.

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CTH is spending time on this issue because the food distribution sector is the most important sector in all commerce. Having some familiarity with the supply chain might help people to understand the challenges; and possibly help you locate product.

The Inversion – Big chain markets; those who spent millions developing their own proprietary ‘just-in-time’ distribution networks and automated ordering systems; are currently the least equipped to deal with the level of demand.  Meanwhile smaller chains, or mom-and-pops, who rely on third-party brokered distribution are faster to respond.

Several factors have increased retail market demand for food products and non-perishables.  People stocking up, kids out of school, some panic shopping (example toilet paper) and now curfews/quarantines have people purchasing more for ‘meals prepared at home’.  Add in a level of closed restaurants and the demand on retail food markets is severely stressed.

In major urban areas the larger retailers are unable to keep up with demand.  This is creating an outward spread as people drive further and further distances to find their needs.  Those who travel a distance ultimately stock-up more; thus the outward spider web-cycle is created.  Based on ground reports Atlanta Georgia is a prime example.

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President Trump, Vice-President Pence and Treasury Secretary Steven Mnuchin lead the daily coronavirus briefing on COVID-19 mitigation efforts from the White House.

[Video Below – Transcript Added]

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[Transcript] – THE PRESIDENT: Thank you very much, everyone. Thank you. Progress being made. And I appreciate you all joining us.

Last night, the FDA announced groundbreaking new policies to further increase testing very substantially so. All states can now authorize tests developed and used within their borders, in addition to the FDA. So the states are very much involved. They have been involved from the beginning. But we’re stepping it up as much as we can, and the testing procedures are going well.

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Earlier today President Trump held a conference call with a who’s-who of executives in the restaurant industry.  One of the key aspects to the call was President Trump asking the CEO’s to continue food service operations despite the dine-in closures.  The reason is simple: the alternative, the retail supermarket industry nationwide, cannot compensate for the closure of restaurants in the total food production supply chain. [Ground Reports]

(WHITE HOUSE) – Today, President Donald J. Trump spoke by telephone with restaurant executives representing hundreds of thousands of hardworking Americans about the response to COVID-19. The executives thanked President Trump and his Administration for the whole-of-government response and for his efforts to ensure the public has the most accurate and up-to-date information.

The President reminded the restaurants that they can help flatten the curve and slow the spread of this virus in communities across the country by encouraging their customers to use drive-thru, pickup, or delivery options.

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By today the closure of dine-in restaurants should be in full swing across almost all areas. Understandably there’s going to be an operational lag as many of those restaurants don’t have the systems or equipment in place for exclusive take-out or pick-up services (ie. carry-out containers); though hopefully many are responding quickly to the changes.

The upstream consequence of the restaurant disruption is going to be even more pressure on grocery outlets already seeing additional traffic. Many people now shifting from meals “outside the home”, back to the more traditional “home-cooked” meals etc. Which brings up the question of the retail supermarket capacity to meet that extra demand.

This coronavirus event is like a nationwide pre-Hurricane shopping experience.

There have been numerous reports of wide-scale shortages in retail food markets. On the positive side this experienced supply chain has the ability to scale-up very fast (depending on region). However, on a national scale this is the first time the entire country has needed this level of increased retail food distribution simultaneously. To cope with the volume most stores appear to have reduced their hours of operation.

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