October 3, 2022: Ian Cleanup, Market Reports, Midterms, and Putin

By Joe Noser, Research Analyst

Last week I wrote that Hurricane Ian, the markets, and international politics would make for a bad week. Well, guess what? Hurricane Ian was bad, the markets were bad, and international politics were a hot mess. But hey, at least Congress did the bare minimum and passed a continuing resolution to keep the lights on. I sure hope things get better soon.

Here's what's Coming Down the Pike this week.

1. The cleanup from Ian will reveal tragic mistakes in Florida: Hurricane Ian made landfall in Cayo Costa, Florida as a Category 4 storm on Wednesday. Its winds topped out around 150 miles per hour and it was twice the size of Hurricane Charley, which killed 35 and caused $16.9 billion in damage when it struck the Sunshine State in 2004. So far, the news out of Florida is really awful. At least 94 people are dead, many of whom resided in Lee County, a county that includes Ft. Myers and Sanibel Island. Inexplicably, and in contrast to those in surrounding counties, Lee County officials did not issue an evacuation order to its citizens until Tuesday morning. Officials including Gov. Ron DeSantis said the evacuation order went out as soon as the forecast changed to show Ian making its way toward Lee County as opposed to further north, where it was originally predicted to go. But forecasts from Sunday evening showed storm surges would put all of Ft. Myers underwater, and the decision not to issue an order was contrary to the county's own emergency procedures. In a man-on-the-street interview with someone who was pulling a boat out of his garage, Jim Acosta heard from a Floridian with a family member in the sheriff's department that county officials were finding "100s of bodies" in the wreckage. That's unconfirmed, but there will certainly be more questions asked about the delay and why DeSantis and his people didn't step in to do something about it. We'll know more on Wednesday when President Biden visits Florida to see the devastation for himself (he's surveying Puerto Rico's damage from Hurricane Fiona today).

2. The first half of the week will be rough on the markets, while the second half will hinge on two critical reports: I'm going to be straight with you: I am now 100% convinced we're either in a recession or will imminently be in one. In an environment where the dollar is at its highest value in 20 years, how could the U.S. economy be on the brink of recession? It's simple, really. We have a Federal Reserve that feels high inflation is a scourge that must be stopped by any means necessary, including driving the economy into the ground. Additionally, since the dollar will remain strong because interest rates are going to remain high and global turmoil won't be slowing down anytime soon (so investors are going to keep buying the dollar since it's a safe bet), American exporters and multinational corporations are going to have to deal with increased costs and decreased sales, since U.S. goods are now more expensive than non-U.S. ones. That means layoffs. On Thursday, we'll get our first indication of whether or not those layoffs have begun when initial jobless claims come out. On Friday, the unemployment rate will come out, as well as average hourly earnings. If initial unemployment claims are above the 200,000 they're expected to be, or the unemployment rate is higher than its current rate of 3.7%, or average hourly earnings is up more than the 0.3% they're projected to improve by, the markets will panic.

3. Congress won't do a damn thing because midterms: We're now a little more than a month from election day, which falls on Nov. 8. Congress is in full self-preservation mode and campaigning like crazy, so there's approximately a zero percent chance the House or "the world's greatest deliberative body" (lol) does anything of substance this month. As of now, the forecasts favor Republicans to take the House and Democrats to hold the Senate, but they also give a 60% probability that one or both of those predictions are wrong (confused yet? So am I). In other words, no one has any idea what the hell is going to happen. However, with the economy trending in the wrong direction and energy costs increasing, a new poll from Monmouth released this morning showed Republicans re-taking the lead in the general Congressional poll. We'll see if that trend continues. The deadline to register to vote in VA is Oct. 17, and if you're voting absentee, make sure to send in your application sooner rather than later.

4. Putin will continue his nuclear saber-rattling, but the most significant effects will be from the Nord Stream 2 pipeline shutdown: Europe is headed straight for an energy crisis of its own doing after the Nord Stream 2 pipeline, which pumps natural gas from Russia into Europe, suffered catastrophic damages via explosions last week. All indications show the damage was due to sabotage, which the Russians are blaming on international terrorism (a classic 2003 boogyman) and everyone else is blaming on Russia (a classic 2022 boogyman). Even Italy has gone as far as to condemn Russia's actions, actions which will further put the pressure on Europe to keep its citizens warm as the fall moves into the winter. Meanwhile, in the wake of Russia's illegal annexation of four provinces in Ukraine (all of which aren't fully controlled by Russian forces), Vladimir Putin is claiming the Russian Federation will use any of the weapons at its disposal – including nukes – to defend "Russian territory." I read a story in The Atlantic that cited experts including William Perry (Secretary of Defense under Clinton; now a well-renowned activist on ending nuclear weapons) who claimed that the world is now closer to the use of nuclear weapons than it's been since the Cuban Missile Crisis. Pray for cooler heads.

Asshole(s) of the Week: Gov. DeSantis earns this distinction after saying in a press conference that would-be looters in Florida should be prepared to meet the wrong end of a barrel of a gun because Florida is a "Second Amendment state." Looting is bad and I do not condone it, but I always feel people are worth more than property. Because DeSantis does not agree with such a principle, he is the Asshole of the Week.

One thing I admire about the Jewish faith is its emphasis on atonement for sins in this life. On Tuesday at sundown, that emphasis reaches its apex, as Yom Kippur will begin. Many Jews fast on Yom Kippur, so be mindful of that when talking to your friends on Wednesday.

All the best,

Joe