Welcome to the June edition of Ratlinks and the unofficial start of summer.
This month’s edition focuses on the season’s hottest trends:
summer movies
summer fashion
recession
For prior trend recaps check out Ratlinks: Summa Summa Summatime
THE R-WORD
A recession is when your neighbor loses his job, a depression is when you lose yours.
— President Harry S. Truman
Recession is a term generally thrown around to signify a slowdown in economic activity. Technically to qualify as a recession the economy needs to post two consecutive quarters of negative GDP growth.
Long time Ratlinks readers remember inflation and the Federal Reserve’s dual mandate to maintain ~2% inflation by promoting effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
At present inflation is running hot at 8.3% per the latest consumer price index (CPI), nowhere close to the FED’s goal of 2% and at a level not seen since the 1980s.
To fight inflation the FED is tightening monetary policy known in econo-speak as “taking away the punch bowl in the middle of the party.” The FED’s goal is to cool an overheating economy and choke off inflation while engineering an economic soft landing.
This is no easy feat, especially when everyone is drunk off easy financial conditions that were vastly expanded in 2020 to offset the deflationary demand shock caused by COVID-19.
Remember Quarantine! Not being able to go out and spend money was deflationary.
Remember Going Full Send in the Market! Yolo market bets were inflationary.
Remember NFTs! Getting rich off jpegs was something.
I've been rich and I've been poor. And, believe me, rich is better
Limiting the economic hangover sounds simple, but is not easy. Slowing the economy down could lead to recession.
What does this mean in English?
Let’s use an analogy:
Imagine the economy as a wheel.
The speed of this wheel is the pace of economic growth. If the wheel spins too fast it can overheat and spin out of control. The FED is not just trying to slow the wheel down but actively trying to get the wheel to spin backward.
The Wealth Effect
When households become richer as a result of a rise in asset values, such as corporate stock prices or home values, they spend more and stimulate the broader economy.
Don’t stonks always go up?
Remember last year and how rich you were? Last June, Ratlinks even presented a summer buying guide to spend that newfound wealth.
The Times They Are a-Changin’
The Federal Reserve’s policy to tighten monetary conditions is negative to quite negative for asset values. Declining asset prices hurt everyone’s net worth and the unwinding of the wealth effect can have far-reaching consequences.
Say you used to go to your favorite restaurant every two weeks, but now due to a reduction in your household net worth you can only afford to go out to eat once a month. If other patrons also reduce their frequency then the restaurant won’t be as busy and won’t need to order as much food or employ as much labor.
Ideally, this “air pocket” is “transitory” and as the economy slows input costs and labor prices decline to a level where demand naturally returns.
That sounds ok in theory, but we live in economic reality. That supplier to that restaurant will now have less demand and also likely needs fewer employees. As we move away from full employment many will have less money to spend and will not eat at as many restaurants. In turn, those restaurants will need fewer workers who will find they have fewer dollars to spend.
Additional inflationary shocks caused by the war in Ukraine are spiking prices of food and energy. These rising costs also negatively impact consumers’ willingness to spend and consumer spending is 2/3rds of the US Economy, making an economic soft landing difficult and increasing the likelihood of a recession.
HOT SUMMER
A longing for what once was, is driving demand now.
Individuals are nostalgic for nostalgia and who can blame them.
Just listening to prior songs of the summer can wistfully transport you away to a bygone era.
People like what they like and what they like are things that feel novel yet familiar.
Erosion of the Hollywood system led studios to avoid riskier untested projects in favor of churning out sequels, reboots, or sequels to reboots.
Hollywood like America was built on franchises.
Nothing says summer like an ice-cold movie theater
In 1993 the film Jurrasic Park defined the term summer blockbuster becoming the highest-grossing film ever, generating $912 million at the box office.
This runaway success paved the way for the sequel The Lost World (1997) and eventually the lesser-seen Jurassic Park III: Phoning It In (2001).
Twenty years later, Jurassic World rebooted the franchise, grossing $1.6 billion in box office revenue, third among the highest-grossing films of all time. As a result, Jurassic World commanded two sequels of its own, with the 6th and potentially last film of the series Jurassic World III: Dominion out June 9th.
Don’t care for dinosaurs? What about other CGI animals?
Chip ‘n Dale: Rescue Rangers is my family-friendly pick of the month. A film written more for adults than kids thanks to an assist from Andy Samberg and the Lonely Island crew. In this reboot, Chip and Dale are both now living in LA where Dale is an out-of-work actor and Chip is, you guessed it - an insurance salesman.
Keep your eyes open for the sight gags younger viewers likely can’t read fast enough, like a billboard for the Mrs. Doubtfire reboot starring Meryl Streep as Mrs. Doubtfire or a campaign ad to re-elect Senator Butthead.
WISEGUYS
Looking for a classic film to watch this summer?
Put on Goodfellas, be it your first or fiftieth time, Marty Scorsese’s incredible first-person gangster film still holds up. Starring the late Ray Liotta as gangster Henry Hill alongside Robert De Niro and Joe Pesci. The film also has a great ensemble including Debbi Mazar and Samuel L. Jackson even Henny Youngman makes an appearance performing at the Copa.
Goodfellas is based on a true story of one gangster Henry Hill, his associates, and the Lufthansa heist, one of the most daring heists in American history.
On December 11, 1978 half a dozen masked robbers raided the Lufthansa Airlines cargo building at JFK Airport in New York, making off with more than $5 million in cash ($21 million in today's inflation adjusted dollars) and almost $1 million in jewelry.
To this day, the Lufthansa heist, as it is known, is considered one of the greatest in U.S. history.
In the summertime, when the weather is hot / You can stretch right up and touch the sky
As you settle in to watch a film, quench your heat-induced thirst with a nutcracker, a dealer’s choice concoction of fruit juice and liquor served in a plastic bottle.
A summertime favorite since the 1990s, Nutcrackers were invented by José Chu who told GrubStreet in 2019 that he came up with the name for the drink after seeing a New York City Ballet ad.
Looking to rip two or ten of these in your local public park?
You better bring your wallet. Nutcrackers can now cost up to $15 thanks to inflation.
JUMP UP, JUMP UP, JUMP AROUND
Spent all your money on bootleg liquor drinks?
Hock your Peloton and replace it with the workout equipment banned in most prison yards.
Thats right for less than a one-time $10 payment, you can purchase a jump rope.
SUPERMARKET CHIC
Did recession force you to reduce your nights out or do you prefer to make dinner at home?
Any chef worth her salt will tell you - You need to look good if you are gonna cook good!
The grammar police will tell you the right phraseology is cook well.
No matter how you say it, this season’s hottest looks come right out of the dairy aisle.