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What caught my eye this week.

Most people have given up on a V-shaped recovery. The concept of a U-shaped one is positively passé.

As for the Swoosh – please!

Nope, the latest red hot letter to explain the state we’re in comes with the K-shaped recovery.

As Barry Ritholz rather reluctantly explained this week:

If you were to describe the 11th letter in the English alphabet to someone who has never seen it, you would note that it is distinguished by a bold vertical line, from the midpoint of which begins two rightward traversing lines, one slanting 45 degrees upward from the horizontal, and the other 45 degrees downward.

This description of the economy fairly captures the two separate paths of the recovery.

The line heading upward symbolizes those parts of the economy that have benefited from pandemic […]

The line heading downward symbolizes, well, pretty much everyone else.

Here’s an illustration from the US Chamber of Commerce:

Source: US Chamber of Commerce

Does it apply to us, too?

Many Monevator readers are richer than they were in January. We’ve retained our jobs, spent less due to being locked-in, and may also have seen our US-heavy portfolios rise, especially if we’ve some bonds and gold, too.

At the same time, other Britons caught in the wrong place when the music stopped – particularly those who fell outside of the safety nets, such as directors of the wrong limited companies – have been hit hard.

Ritholz sees the K-recovery as a continuation of wider trends:

Over the past four decades, the U.S. has become a nation that has seen the benefits of economic growth, productivity and innovation accruing to fewer and fewer people.

Once a nation of ‘Haves’ and ‘Have Nots’, we are now a nation of ‘Haves’, ‘Have Nots’, and Have Much More’.

The last category has left the first two in the dust.

Here’s an example of the K-shaped recovery applied to the US workforce by The Washington Post, cited by econlife:

OK Computer (says no)

Here in the UK I’d say we’ve only seen the ghost of a K-shaped recovery so far.

Government support and the generous furlough scheme curbed – or at least delayed – the lived impact of the UK’s brutal GDP collapse.

While we have plenty of rich individuals who are doing alright, sector wise we don’t have a vast tech industry that can benefit from the upper leg of the K. At the same time, the Eat Out to Help Out scheme may have helped the K’s lower leg look kinkier for the hospitality sector.

Not wildly convincing.

Ultimately the letter K will probably prove about as useful as the letters that preceded it in predicting what will happen next.

Which, to my mind, is not very useful at all!

From Monevator

The ISA Allowance: What it is and how to use it [Deep dive!]Monevator

From the archive-ator: Am I saving enough for retirement? – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Minimum age for UK personal pension to rise to 57 by 2028 – Guardian

US unemployment rate falls back below 10% on rehiring spree – BBC

Coffee, ketchup and Nike Air Max: it’s the Covid consumer economy – Reuters

Hedge fund billionaire Ackman says US government should fund equity pensions from birth – MarketWatch

UK house prices hit record high after easing of lockdown – Guardian

Products and services

Virgin’s new 90% mortgage deal offers hope to first-time buyers – Which

Open a SIPP with Interactive Investor before 30 September and you won’t pay any SIPP fee until April 2021, saving £60 – Interactive Investor2

Monzo to bring in some fees for cash withdrawals – Guardian

Pret to offer coffee on a monthly subscription – BBC

NS&I rate cut expected, following £8bn into premium bonds – ThisIsMoney

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Homes for sale (or to rent) in converted pubs [Gallery]Guardian

Comment and opinion

Merryn S-W: Sunak must avoid the rabbit hole of huge tax rises [Search result]FT

By any other name [On pseudo-alternative assets]Demonetized

How much is enough? – A Wealth of Common Sense

If the 60/40 keeps working then democracy has failed – Bloomberg via MSN Money

The Texas Hedge: Don’t currency hedge your equity portfolio – Finumus

Debtors’ prison – Humble Dollar

Why do poor people stay poor? – Of Dollars and Data

Naughty corner: Active antics

Follow the earnings… – Novel Investor

…how dare you, Sir! – The Reformed Broker

Warren Buffett buys stakes in five Japanese trading firms – ThisIsMoney

Commodity investment trusts are all the rage – IT Investor

The different shades of active management – Valididea

“I can’t believe I’m saying this but I’m passing in Seth Klarman”Institutional Investor

Covid-19 corner

Why UK coronavirus deaths are falling even as cases rise [Free to read]FT

Slow burn likely until vaccines available [Deep, US-centric]Morningstar

A Covid-19 reunion: The joy of seeing parents again – Next Avenue

Kindle book bargains

How Innovation Works by Matt Ridley – £0.99 on Kindle

The Deficit Myth: Modern Monetary Theory by Stephanie Kelton – £0.99 on Kindle

How to Get Rich by Felix Dennis – £0.99 on Kindle

Bitcoin Billionaires: A True Story of Genius, Betrayal and Redemption by Ben Mezrich – £0.99 on Kindle

Off our beat

Making time – Humble Dollar

Massive mystery holes appear in Siberian tundra – CNN

The value of EQ has peaked – Summation [via Abnormal Returns]

Bitcoin miner is scoring 700% profits selling energy to grid – Bloomberg

The oysters that knew what time it was – Wired

Take ownership of your future self – Harvard Business Review

And finally…

“Poker isn’t just about calibrating the strength of your beliefs. It’s also about becoming comfortable with the fact that there’s no such thing as a sure thing – ever. You will never have all the information you want, and you will have to act all the same. Leave your certainty at the door.”
– Maria Konnikova, The Biggest Bluff

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  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.
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