Guest Post by Simon Black
New York City is up 33% this year. St. Louis is up 66%. In Oregon it’s up 100%.
I’m not talking about real estate prices, local budget gaps, or even property tax rates.
These are the startling increases in the number of people across the country, and the world, who are in need of food.
Food banks across the Land of the Free are experiencing an enormous surge in demand from people looking to feed their families, many of whom are experiencing such economic hardship for the first time.
The director of a local food bank in western Massachusetts, for example, recently said, “I thought I had seen the worst during the Great Recession [of 2008-2009]. But what we have experienced since March due to COVID-19 has really overwhelmed us.”
I saw a video last week showing thousands of cars “stretching as far as the eye can see” in line to receive free food from a local food bank in my hometown of Dallas, Texas.
Similarly, Miami had a “massive food bank line stretched for two miles.”
You can see the same thing in big cities like New York and LA, to quieter towns like Erie, Pennsylvania, and across the world.
In the small town of Dorset in southwestern England, food banks have handed out an astonishing 1.2 million meals over the past few months, shattering all previous records. And local officials say that was just the tip of the iceberg.
It’s obvious there are millions upon millions of people who are suffering immeasurably because of Covid lockdowns.
Yet amazingly enough, the stock market is at an ALL TIME HIGH.
More than 11 million people in the US alone are still unemployed. 2.7 million homeowners are in forbearance (meaning they’re not paying their mortgages). Millions more are relying on food banks to feed their families.
Consumer spending (which makes up 70% of US GDP) is still well below where it was before the pandemic.
And according to Standard and Poors, corporate profits of the S&P 500 are down 48.96% compared to this time last year.
Plus there are entire industries– retail, travel and tourism, commercial real estate– which have been completely vanquished. And it’s unclear if they’ll ever fully recover.
Lockdowns have already restarted across the country, and Joe Biden’s advisors are suggesting that the entire nation should lock down for 4-6 weeks early next year.
(Ironically these same advisors are calling to #defundthepolice while simultaneously demanding the police enforce their ridiculous lockdowns. They also want to raise taxes on businesses, but that’s another story…)
Yet, again, the stock market is at an all-time high, higher than it was before the pandemic when corporate profits were at record highs and the unemployment rate was at a record low.
Somehow lower profits + lower consumer spending + higher unemployment + ravaged economy + soaring demand for food banks = record high stock prices.
I don’t think you need a PhD in finance to understand that this makes absolutely no sense– the stock market is completely disconnected from any sort of reality.
It’s no longer about productivity, innovation, profitability, or the health of the economy.
The market has become nothing more than a casino, and investors merely gamblers, placing bets on how much government stimulus money will be sprinkled around the economy, or how much more money the central bank will print.
It’s as if as if trillions of dollars of wealth didn’t evaporate this year. Or that all of the lost value can just be conjured out of thin air by the Federal Reserve.
That isn’t even close to the same thing.
Real wealth comes from production and value creation. It doesn’t come from a central banker conjuring trillions of currency units out of thin air with the push of a button.
And wealth certainly isn’t created when governments go into debt to pay people to NOT work.
I’m not saying any of this to be pessimistic; there are obviously a lot of signs of improvement, and the economy is in better shape than it was six months ago.
But even if Covid did suddenly and miraculously disappear off the face of the Earth, there would still be the legacy of trillions upon trillions of dollars of new debt to contend with.
Consumer debt, corporate debt, and government debt have all soared to all-time highs due to Covid.
But debt is not wealth. Going into debt means borrowing from future prosperity in order to consume today. Debt has to be repaid eventually, and serviced. This is the opposite of wealth.
Yet no matter how high these debt burdens grow, the stock market keeps charging higher.
Even more bizarrely– there’s a decent chance this trend will continue as long as the Fed keeps interest rates at record lows to fuel the stock boom (which they probably will).
And that’s the nature of asset bubbles: as long as central banks print money, asset prices have support to move higher. It’s basically free money for investors.
Now, there’s certainly nothing wrong with grabbing some of that free money that the Fed keeps pumping into the stock market.
Just make sure you’re keenly aware of the risks that you’re assuming. Because if 2020 has taught us anything, it’s that everything can change in an instant.
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Interestingly, in the video of the cars waiting at the food bank, nearly every single one of them was newish. So, they have money to pay the nut on a new car, but not for food.
The amount of crazy in the world is only exceeded by the amount of stupid.
And the last time I looked, the stock prices (ie the Dow) was being driven by speculation on tech stocks. There is an Oz tech stock selling for 100 times sales. Not profit. Sales. This will come a cropper sooner or later.
Is food for the needy greedy.
We have a different slogan out here in flyover country – Defund the Game Wardens
Imagine my shock when I discovered there really is a rabbit season.
Are those 9 acres still for sale?
No. Sold in August to a young couple from city. With a tot!
Correction, they did have the money for the payments before covid and the government destroyed their lives and jobs. DFW is very big and spread out. You can’t function without wheels.
PS, it isn’t so easy to get out from underneath a 10-15% auto note after missing payments during lockdown & subsequent unemployment. You are then upside down vs bluebook. You can’t trade in to get the payment lower on cheaper used car unless someone will roll arrears into new note, under-securitizing it. No deals on used cars because everyone else in the same boat. Finance cos would rather repo than make missed payment concessions because they can capture all your equity at auction. You might try not being so dismissive of all of these people’s distress.
Hey Gen – you might kiss my red ass. Those idiots bought those cars all by their lonesome. Buying a car on credit is almost always stupid. And stupid has consequences. And if they were behind on payments, the cars would get repoed.
A crisis has been coming for a very long time. If people made bad decisions, got into debt, and are now in trouble it is for the most part on them. Pandemic, recession/depression as a result of other issues, whatever – it was coming.
People live beyond their means. They have lived tens of trillions of dollars beyond their means, and are counting on govts coughing up unfunded liabilities of hundreds of trillions of dollars. That ain’t happening. And Blind Freddie could have seen it coming. But people still did nothing. Being blindly stupid has consequences.
Wise the fuck up.
I am always amazed that people can get themselves to sign up for so much debt on a new car.
forty thousand dollar pickups? Now they have no work and can’t pay the loan. The news doesn’t talk about all the homes being foreclosed on or the cars being repossesed.
Plus 7 year notes on the overpriced vehicles.
Yahright,
Serious question: do you have numbers for those? I live in Northern Va., and for the moment I am very happy about that, and things seem to be fine around here. My sister, sister inlaw and my brother inlaw have lost there jobs though (DC region all). Don’t know how long it will stay this way though.
CBS Sunday Morning this week was about food. They featured the segment of the cars lining up for food in San Antonio, TX. I too noted that lots of people had very new cars and some very high end. Way more than my almost pedestrian Honda.
does grub-hub deliver while in-line waiting for that free food? just curious
“the stock market is completely disconnected from any sort of reality”
Bravo! May that observation spread far and wide, for whatever good that might do. Those who work or have worked in the casino have known that for a long time, given that the individual investor has nothing whatsoever to do with market movements. The “market”is a worthless indicator save for big-time speculators. “Investment”? Ah, ha-ha-ha! Read Graham and Dodd if you wish to understand “investment”.
“Now, there’s certainly nothing wrong with grabbing some of that free money that the Fed keeps pumping into the stock market.”
Oh, no? Well, “values” differ among people. I prefer the “starve the beast” approach, but then I’ve got mine, so who am I to judge (credit “Pope” Francis). I can’t shake the feeling that “Big Touble in Little China” (increasingly the USA) is on the horizon and for us “little folk” this bodes ill. My horizon is now bordered on my property line and to a lesser extent my village.