That Was The Week That Was

February 11, 2018

Wall Street had its freak-out and a new space race was born. What a week. With a little bit of luck, I can bring these interesting new developments “down home” and show how they may affect us all.

 

Let’s first look at the wild ride last week on Earth, on Wall Street to be precise, leaving many of us scratching our heads and wondering what was going on.

 

What we have learned is that good news on Main Street – that the U.S. economy added 200,000 jobs in January and that wages grew at fastest pace in eight years -- can be viewed as bad news on Wall Street.

 

For investors, the long dormant fear of inflation was revived – that bigger paychecks might mean bigger price increases and eventually bigger rate hikes on the part of the Federal Reserve. That would be bad for business and the economy at large, which means most of us.

 

No doubt, investors had become a bit complacent with the stock market rising and never suffering a bad loss. The Dow and other major stock market indexes hit record highs on Jan. 26. The S&P 500 was up 7.5 percent in 2018, with the Dow industrials up 7.7 percent and the Nasdaq 8.7 percent. Amazon and Netflix had sprinted 20 percent and 43 percent.

 

But last week was crazy. The Dow average experienced two drops of more than 1,000 points and two gains of more than 300 points. The Dow and the S&P 500 both ended the week 5.2 percent lower, their worst performance since January 2016.

 

What are We Seeing?

 

Wall Street uses different words for a drop in the markets, all with different shades of meaning. Are we seeing a “dip” a brief downturn from what has been a long-term uptrend? Or are we looking at a “crash,” a sudden and very sharp drop in stock prices, which while rare, do happen after a long-term uptrend.

 

Perhaps we are experiencing what most analysts are calling a “correction,” defined as a 10 percent drop in the market from recent highs. Then again, we might be in the early stages of a “bear market,” a long, sustained downturn in which losses will surpass 20 percent from the market’s most recent high.

 

I doubt that anybody truly knows right now. I cannot help but recall the words of John Kenneth Galbraith who said, “The only function of economic forecasting is to make astrology look respectable.”

 

A Lack of Serious Leadership

 

And while the fundamentals of the economy appear to be very good, I do worry that our nation’s debt, now at over $20 trillion and growing, is not being addressed in any serious manner by policymakers in Washington, D.C.

 

And therein may be another underlying cause for the jitters on Wall Street – nobody, it seems, is minding the store, the ship of state, in a competent manner. I quote from the New York Times from last week:

 

“Republicans propelled themselves to power in Washington by promising an end to fiscal recklessness. They are now embracing the kind of free spending and budget deficits they once claimed to loathe.

 

“Congress is debating a bipartisan spending deal that would blow through the caps imposed by the 2011 Budget Control Act, unlocking $300 billion in additional spending for the military and domestic programs over the next two years. That comes on top of last year’s $1.5 trillion tax cut package and as the White House prepares to unveil Monday a $1.5 trillion infrastructure plan that would require $200 billion in government funding.

 

“While the White House says it plans to offset that $200 billion through unspecified cuts, none of the other spending is paid for at a time when the nation’s debt already tops $20 trillion.”

 

Some day the chickens are going to come home roost, and I fear that it’s going to get very, very ugly.

 

Now let’s go onto something a little more uplifting.

 

A New Space Race

 

Somewhere floating out there in outer space is a red shiny 2008 Tesla roadster with a space-suited mannequin named “Starman” behind the wheel. Conceivably car and driver could be up there for a very long time. And the car will probably get a little dusty along the way.

 

 “It'll probably get hit with something the size of very fine sand every year or so, and get hit a few times an hour with 100-nanometer-size dust,” Andy Rivkin, a planetary astronomer at Johns Hopkins Applied Physics Laboratory, told The Atlantic magazine. “On average, we think it’d get hit by a fist-sized rock every several million years.”

 

Several million years. And to think, back here on Earth, Consumer Reports says the average life expectancy of a new vehicle these days is around eight years or 150,000 miles.

 

This Tesla’s life expectancy was extended by its billionaire owner, Elon Musk, the real-life Iron Man whose enthusiastic embrace of technology for technology’s sake and desire to push the limits of what is possible for private enterprise has ignited a new space race.

 

“We want a new space race,” Musk told a press conference in Cape Canaveral after the launch of his SpaceX’s Falcon Heavy rocket into deep space. “Races are exciting.”

 

Mind you, the original space race was between the old Soviet Union, which took an early lead with the launch of Sputnik 1, the first artificial Earth satellite, on October 4, 1957, and the United States, which came roaring back with NASA’s Mercury and then Apollo programs, which resulted in man setting foot on the moon.

 

Competition is the American Way

 

Last week’s launch of the Falcon Heavy, now the most powerful operational rocket in the world, underscores that we have entered a new era in which companies and not just governments are competing for a place in space.

 

And it comes at a time when the Trump administration is looking to restructure the role of NASA, ensuring that private enterprise and international partners work closely with the space agency. Musk is forcing the issue whether NASA likes it or not.

 

“He’s being Elon again. I’d call it competition, and competition is the American way of life,” said John Logsdon, professor emeritus at George Washington University and founder of the Space Policy Institute told the British newspaper The Guardian. “SpaceX has challenged the traditional launch industry in the United States and in Europe and in China and in Russia.”

 

Elon, Jeff and Richard

 

Now billionaires and their companies have ambitions well beyond government contracts but the commercialization of space itself. Virgin Galactic, the space company founded by Richard Branson, and Amazon founder Jeffrey P. Bezos’ Blue Origin are hoping to fly humans for the first time this year on suborbital jaunts that could reach the edge of space. 

 

Blue Origin recently opened a facility at Kennedy Space Center in Florida to build the New Glenn reusable rocket system, named after John Glenn, the first American to orbit Earth, which will be even bigger than the SpaceX Falcon Heavy rockets. In a tweet posted Tuesday night, Bezos congratulated Musk on the launch with a "Woohoo!"

 

Branson, founder of airline Virgin Atlantic, established Virgin Galactic back in 2004 with the goal of provide suborbital spaceflights to tourists and suborbital launches for missions into space. There are also plans for orbital human flight.

 

"Elon is absolutely fixated on going to Mars and I think it's his life mission," Branson said on CNBC "Squawk Box" in October 2017. "Jeff and ourselves [at the Virgin Group] are more interested in how we can use space to benefit the Earth."

 

So 49 years after the first man set foot on the moon, we have entered a new era, a new space race where the private sector may take the lead. While this may alarm some of the traditionalists at NASA, I believe this is a very good thing in the long run.

 

Along Florida’s Space Coast, most of which lies within Brevard County, there is a renewed excitement

 

“No question that other companies around the world, they are looking at establishing facilities in Florida so they can be near the center of space activity,” Space Florida President and CEO Frank DiBello told the Orlando Sentinel. “We want to drive all of those to create tourism and job opportunities for next-generation engineers and the space workforce.”

 

Musk was right. Space races are exciting.

 

I’ll see you down the road.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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