3M Company (MMM)

What 3M leadership cannot comprehend is the same thing American leadership cannot grasp: the nation and the whole chunk of western economies are on the cusp of a major economic collapse while holding exorbitant amounts of debt. Dealing with debt under these circumstances is dire.

Like crazy western governments, the company is still spending large on dividends while two things persist: (1) huge debt loads ; and (2) an economic slowdown accompanied by striking producer price increases.

As I’ve said before, and will say again, attempts to pay down inflated debt using deflated federal reserve notes is nothing short of a recipe for disaster.

In order to survive in good shape, 3M needs to pay off its debt now for it will not be able to do so when it has no earnings. This business of increasing dividends when equity, bond, and real estate markets are collapsing is much worse than the proverbial ostrich putting its head in the sand. It is the tornado chaser driving right into the path of the cloud.

The deflation we’re seeing in these three markets is not only not going away, it is rapidly accelerating, and it is doing so while commodity prices swiftly climb. And as both do so, revenue numbers will shrink dramatically while debt will have to financed as much higher interest

In other words, there’s going to be much less revenue and more expenses. And because 3M does not sell the basic things people need to survive, namely, food, fuel, and housing, it’s sales will have to drop. And drop they will.

Scotch tape is not going to be on the shopping list when the consumer is dealing with hunger, lack of heat and fuel.

I stick with my prediction: 3M to $105 in six months. If they scrap the dividend, it may get there sooner. But in the long run, it will save the company, provided the savings are used to pay off debt.

We are no longer living in your grandparents economy, unless they lived through the Great Depression.

William Gates proposes creating an “expert” cadre for the World Health Organization to monitor sovereign nations and to decide when they need to suspend people’s civil liberties to enforce health decrees.

The B administration wants to sign the USA onto an international treaty that gives the WHO unprecedented power over United States’ citizens and our personal health decisions – with dire consequences if you and I disagree.

Now why would Sniffer want to do such a thing? So much for his oath to support and defend the US Constitution. Looks like he’s working for somebody else.

I won’t mention what’s happening in Europe with respect to price levels. It’s too disgusting even for me to look at.

But here’s just a sample what our government has done to our currency as a result of excessive government spending.

Electric bills nationwide rose an average of 8 percent over the past 12 months, the U.S. energy department reported. Rates in Florida, Hawaii, Illinois, and New York spiked as much as 15 percent.

In the first two months of this year, electricity’s price averaged 14 cents per kilowatt-hour (kW) nationwide. It hit 25 cents in Massachusetts and 38 cents in Hawaii, the highest in the nation.

Electric bills rose together with the cost of natural gas, which fuels about 40 percent of the country’s electricity generating plants and heats most homes.

I won’t get into groceries and gasoline since those are constantly in your face each day.

The price increases are now rivaling those of the late 70s, which took 20% interest to quell. How will the government fund itself when it has to refinance $30T at 20%?

“Impossible” you say. “Correct” I say.

The only other options thus are default Argentine style or hyperinflation Germany/Zimbabwe style. What will Sniffer and Powell do?

Economic activity in Europe is slowing at the same time prices are rising.

Retail sales across the 19 countries using the euro currency slipped 0.4 percent in March, three times more than the 0.1 percent expected by economists Reuters had surveyed.

Sales dropped 4 percent in Spain; France and Germany also saw sharp declines.

People bought more food, drinks, and tobacco, but less non-food consumer products, motor fuel, and less online and from mail-order retailers.

Costs for energy and food have surged amid a record inflation rate of 7.5 percent in April, further shrinking household purchasing power.

We’ve seen the same here in the USA: rising prices into a slowing economy. Gasoline prices now exceed $4.00 easily in most venues. A 2x4 now costs almost $7.00, causing new housing sales to slow.

With less production on both sides of the pond, government revenues will shrink, making governments more reliant on debt monetization to fund operations.

Trying to fund government in this fashion while proclaiming to shrink central bank balance sheets is a fine example of extremely bad math. Both cannot be achieved. Of course government will choose the former, as it always does.

What this all means for the layperson is accelerating inflation in the face of decelerating production. Even most layman know that more money chasing fewer goods means higher prices — they can add 2 + 2.

In short, the macro economic situation is deteriorating all across the western world.

Yesterday’s CPI numbers — which are not monetary inflation any more than a positive PCR test shows you have covid — were not good.

So, now the fed funds futures are pricing in a 100% chance of two more 50 bps hikes and a 92% of a 3rd, up from 80%.

Those hikes would take overnight lending up to around 2.5%, meaning the 10 year treasury would have to hit at least 4.5% to keep the yield curve from inverting. Can anyone say mortgages of 6.5% for 30 years?

While that number will certainly curtail housing sales and home prices, it also will certainly cut into government revenues. Due to deflation in housing and related sectors, the current budget deficit of a whopping 1.5T will likely double, if we’re lucky.

Imagine the government funding 3T in government expenses through monetary inflation. What will that do to prices for consumer staples? And how’s the laid-off carpenter going to afford it? Well, no better than the out-of-work concrete contractor or the broke real estate agent.