Small Business Under Threat (Again)

1TikTok Ban “Devastating” For Small Business

The impact of the TikTok ban on small online businesses is coming into view…

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Maybe you saw the news yesterday: To no one’s surprise, TikTok is suing to block the law that would either ban the app in the United States or force a sale of TikTok’s U.S. operations.

The bill was rushed through Congress so quickly this spring that small-business owners scarcely had time to react or get their voices heard.

Now, from across the country, stories abound in local media outlets profiling people who say their livelihoods are at risk.

“TikTok is the best social media platform for small businesses without a doubt,” says Kimberly Ochsenbein, owner of Akron Lights Candle Company. “The viral potential and the expanded reach that you get from TikTok, you can’t get that from any other social media platform,” she tells the Ohio Capital Journal.

In Georgia, “90% of our sales are on TikTok Shop,” says Paul Truong, who owns a skincare company with his wife called Love & Pebble. A ban “would be catastrophic,” he tells the Rough Draft Atlanta site.

In Texas, Jordan Smith owns an online clothing store catering to tall women. “It would really devastate me if this platform went away, just because it has been so helpful,” she tells KXAN-TV in Austin.

The TikTok ban stands to be the second major blow to small online business owners since 2018.

The first was the Supreme Court’s Wayfair decision — forcing online retailers to collect sales tax on behalf of the 45 states that levy a sales tax.

Of course the rates vary from state to state, and so do the items on which sales tax is charged. Yes, there are outside vendors who can help small online businesses navigate the thicket of differing rules… but it’s still a drain on the precious time and money of entrepreneurs.

The TikTok ban is a much bigger burden for those businesses who count on TikTok to get their message out.

True, it’s always a risk when your business model relies on a single platform for advertising or publicity or distribution. A few years back, several small e-publishers were instantly wiped out when Facebook changed the algorithm for its “news” feed.

But there was no government coercion brought to bear in the Facebook instance. There is here.

And for many entrepreneurs, TikTok offers advantages no other platform can: “This platform is my primary source of traffic, and it’s not for lack of trying on the other sites,” says Callie Goodwin, who runs an online card shop in South Carolina.

As she writes in Columbia’s newspaper The State, “When you think about the 7 million small businesses on TikTok across the country, the extent of that financial impact can’t be ignored.”

Unless you’re one of the 360 representatives and 79 senators who voted for the ban, that is…

2Shipping Capacity Under Stress

The impact of the ongoing harassment of Middle East shipping by Yemen’s Houthi faction is now quantified.

The giant Maersk shipping line issued a new outlook through the end of June…

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As Emily mentioned in last Saturday’s edition, the trouble has extended from the Red Sea into the Indian Ocean. “The risk zone has expanded, and attacks are reaching further offshore," says a Maersk statement to customers — advising of “additional time and costs to get your cargo to its destination for the time being.” Fuel costs are up 40%, not to mention overtime for crews and other expenses.

There’s no end in sight — although as I said in January, Joe Biden could put an end to this state of affairs with one phone call, not unlike a phone call Ronald Reagan made in 1982. But few people on either side of the political divide seem interested in entertaining the possibility…

The stock market’s May rally is taking a breather today.

At last check, the Dow is up about a quarter percent and the Nasdaq down about the same. The S&P 500 is microscopically in the red at 5,183. Every rally needs a rest before the next leg up.

“I was expecting a longer choppy period for stocks following the red-hot start to the year, but clearly the market has other plans,” Paradigm trading pro Greg Guenthner told his Trading Desk readers yesterday.

“We can’t ignore the price action. And right now, it’s looking like many stocks are prepared to retest their spring highs.”

Precious metals are quiet, gold at $2,318 and silver at $27.40. Crude is little moved after the Energy Department’s weekly inventory numbers, a barrel of West Texas Intermediate fetching $78.78.

3The “Big Picture” Case for Crypto

The same macroeconomic factors that make gold attractive also make crypto alluring.

Paradigm crypto analyst Chris Campbell made the case recently to readers of Altucher’s Early-Stage Crypto Investor. If you already hold precious metals, it should sound eerily familiar.

“The current economic environment,” he wrote, “is characterized by high debt levels, slow growth and a reliance on central bank and government interventions to keep the system functioning.

“Global central banks have agreed to use quantitative easing (i.e. expanding their balance sheets) to monetize government debt and keep interest rates low.

“Right now, economic growth (GDP growth) is too slow to cover the interest payments on the high levels of debt in the system. The solution? Stimulus, which can come in various forms, such as reducing interest rates, quantitative easing, draining the reverse repo, etc.

“While the consequences are currency debasement and rising asset prices (like crypto), the central banks avoid a deflationary collapse under the debt burden.

“BUT let’s say things don't go that way. What if central banks can’t control the deflationary monster?” Chris goes on.

“In short, debt burdens would increase, with rising defaults and bankruptcies, falling asset prices, rising unemployment and more.

“There’s STILL a case to be made for crypto.

“In a stagflationary or deflationary environment, for example, there would be increased interest in tokenizing real-world assets, such as real estate, commodities or even debt instruments, on blockchain networks.

“This would create new investment opportunities and provide alternative financing and liquidity channels for otherwise illiquid assets. Moreover, access to credit through DeFi protocols could become more attractive as traditional lending channels tighten.”

Sounds counterintuitive. but crypto and gold could save your bacon in the event of a deflationary depression.

Our macro maven Jim Rickards made the case for gold in such a situation over a decade ago: “In that world, I might like my $500 gold better than my $5,000 gold." In other words, gold would still perform the job of preserving purchasing power — and it would perform that job way better than stocks.

4The Washington-Wall Street Revolving Door

It doesn’t get much more incestuous than this: Disgraced Dallas Fed chief Robert Kaplan has landed at Goldman Sachs.

Kaplan was one of two regional Fed presidents who were trading positions in individual stocks at a time the Fed was intervening to halt the COVID crash in March 2020. Both ended up resigning in the fall of 2021.

The Fed’s inspector general found only the “appearance” of a conflict of interest — huge trades in the likes of Delta Air Lines, Chevron and Apple the very week in March 2020 that Donald Trump was shutting down the economy. Just a bad look, that’s all, no insider information or anything.

Kaplan has signed on as vice chairman at Goldman — coming back through the revolving door, having previously spent more than 20 years with the vampire squid.

Per a Reuters dispatch, “Kaplan will give strategic advice to the Wall Street giant's clients globally, working closely with its teams across global banking and markets, and asset and wealth management, the bank said in a statement.”

Yeah, I bet he will…

5Mailbag: Trump-Proofing and “the” Ukraine

On the topic of “Trump-proof” regulations we mentioned off the top yesterday, a reader writes…

“Since the Supreme Court is going to rule on Chevron deference — where agencies can interpret laws that have revenue impact to their liking without congressional oversight — would these same agencies involved in ‘Trump-proofing’ be affected if the SCOTUS ruled that changes must have congressional oversight and approval?”

Dave responds: I half-wondered if someone would write in about this.

If you’re unfamiliar with the topic, “Chevron deference” refers to a 1984 case in which the Supreme Court “adopted a blanket presumption of deference to statutory interpretations put forth by regulatory agencies in any case where the statute was ambiguous, so long as the interpretation was reasonable,” as Peter Suderman writes at Reason.

In other words, for the last 40 years the court has “deferred” to regulators in one case after another brought by the regulated. The court has taken regulators at their word when they say they’re acting within the bounds of the authority granted them by Congress via one law or another.

Without getting any further into the weeds, the court will rule on two relevant cases before the end of June. Chevron deference probably won’t be scrapped altogether, but it will be in for significant revision — affecting rulings on cases that come before the court in the years ahead.

The impact on the “Trump-proof” regulations that the Biden administration is looking to ram through this month? Hard to say until the court rules.

And as I mentioned yesterday, the Biden administration’s “Trump-proofing” efforts are guarding against what seems like a low-probability event six months out from Election Day — a Trump win and GOP control in both houses of Congress. At this rate, there’s a good chance the Democrats will flip the House and Republicans will flip the Senate…

“Speaking of names,” a reader writes as we pivot to our ongoing place-name thread, “why is Ukraine no longer called ‘the Ukraine’?

“Also, I was born in the Bronx: When addressing an envelope, standard operating procedure was to write/print, ‘Bronx, NY Zip code’.”

Dave: For as badly as Wikipedia has evolved into a deep-state mouthpiece, its take on the question is remarkably neutral…

In the English-speaking world during most of the 20th century, Ukraine (whether independent or not) was referred to as "the Ukraine." This is because the word ukraina means 'borderland' so the definite article would be natural in the English language; this is similar to Nederlanden, which means 'low lands' and is rendered in English as "the Netherlands." However, since Ukraine's declaration of independence in 1991, this usage has become politicized and is now rarer, and style guides advise against its use.

Nowadays, “the Ukraine” is mostly a marker of one’s age: Boomers still say it out of habit, Xers rarely, millennials not at all…

Best regards,

Dave Gonigam





Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets

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(FIT 21)

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