We’re going head-to-head with one of the biggest economic questions of the year.
The answer may change the way you invest, the way you think about money and even how you spend it.
We’ll frame the scene with some words from a reader:
The disconnect between Main St. and Wall St. is insane. Small businesses are going under and unemployment is running out for people formerly employed in the hospitality and other industries.
Their jobs may never come back. Consumer spending is 70% of GDP. How do you see 100K on the Dow?? – Reader S.B.
He’s right. The pain on Main Street is real.
We won’t hit you with the number of unemployed… bankruptcies… or pending foreclosures. You’ve seen them.
In Illinois, Governor J.B. Pritzker recently called the situation “incredibly dire.”
We will hit you with a different set of numbers instead. It’s the amount of cash that’s being thrown around. It’s not just the nearly $1 trillion pledge that’s making its way through Washington this week… or the nearly $6 trillion that’s already been spent.
No. There’s a lot more free money coming from a lot more places.
Michigan is also gearing up to send another big round of checks to its unemployed through a $100 million plan.
Wisconsin is aiming for a $541 million package.
Minnesota wants to send another $500 to residents.
To somebody with an expensive mortgage, student loan debt, two car loans and a Netflix addiction, a single $500 check is not a lot of money.
We heard from one out-of-work barkeep this week who’s getting less than $150 each week in unemployment benefits. He plans to get evicted come January.
So how in the world do we see the Dow hitting 100K just a few short years from now?
Well… see above.
Trillions of dollars are getting printed. That’s brand-new money that must go somewhere.
And while a $500 check from the state doesn’t do one poor fellow much good… that cash when spread to just a quarter of Minnesota’s 5.6 million residents balloons quite quickly.
And here’s where we crash into the jagged rocks at the bottom of that slippery slope we’ve been raging against for so long…
Thanks to half-assed regulations… lazy zoning laws… lobbyist handouts… and, the biggie, a decadelong policy of zero interest rates, much of that money has flowed into a handful of very large, very dominant publicly traded companies.
Get this jaw-dropping fact that was released just this week…
More than half of the cash pumped into the economy through the Treasury Department – the money that was meant to keep folks employed and small businesses from closing up shop – went to just 5% of the recipients.
Again… 50% of the money went to just 5% of the recipients.
From the Houston Chronicle on Tuesday:
According to data on the government’s Paycheck Protection Program, about 600 mostly larger companies, including dozens of national chains, received the maximum amount allowed under the program of $10 million.
We won’t argue about the merit of the spending. It certainly saved jobs and provided a lifeline to the nation’s economy.
But that combined with the fact that many of those same businesses were deemed “essential” while so many mom-and-pop stores were forced to close by the COVID cops, it’s quite clear the odds are absolutely tilted in favor of the big.
If we were sliding down a slippery slope toward a land dominated by behemoths, the pandemic picked us up and body-slammed the nation to the bottom of the hill.
Again… record highs on the stock market coinciding with soaring bankruptcies prove it.
There’s a massive, devastating divide.
But there’s one other thing most folks haven’t thought about. Perhaps we should have led with it…
Take a Loan?! You’re Crazy
It’s the effect of zero-percent interest rates.
When Ben Bernanke first pushed rates to zero, he put a permanent buttress in the canyon between the big and the small. As long as rates are so low, the two will never close the gap.
After all, the reason small companies struggle isn’t a lack of access to capital.
The money is there if they want it.
The problem is – again, we go back to the slippery slope that leads us years back – reams of regulations and restrictions make access to that capital almost entirely unnecessary.
Why, for example, would a local butcher want to expand his shop to fill the crush of demand for local food right now, when a government regulator can shut him down on a whim? He’d lose his house if just one bureaucrat got in the way.
Why would the local mechanic take an ultra-cheap loan to add four new bays to his shop, when hiring just a couple more full-time employees would push him over the threshold, requiring him to provide hugely expensive health insurance for all his workers?
Or how about this… Why would anybody take advantage of record-low interest rates to buy a storefront in the center of a city that’s so broke, it charges citizens $4.50 to park along the street for an hour? It gives the big-box store just a few miles away (which the owners got a tax break to build) an incredible advantage.
To show just how bad things are for the little guy, get this. More than one-quarter of U.S. workers have jobs where licenses are required. That stat comes straight from the White House.
We’re not sure whether they’re bragging… or trying to make us cry.
(For a great read on more of this nonsense, we urge you to check out our own Joel Salatin’s book Everything I Want to Do Is Illegal. It details the fight straight from the front lines. (Click here for more details.)
Capitalism Has Been Stimulated to Death
It’s true that the big boys of Wall Street have to deal with this same nutso regulation too.
Facebook’s boss was dragged to Washington plenty of times this year.
Then again, the tax breaks are surely worth the trip.
Zuckerberg, after all, recently locked in a 20-year tax exemption from the fine folks in Iowa. Utah has gifted the web giant another $150 million, with Texas and its $140 million in subsidies quickly catching up.
Meanwhile, little ‘ol us just paid the king at the county office $180 for the “right” to put a sign at the end of our farm’s drive. That’s a day’s profit for many small-business owners.
If it sounds like we’re dumping on capitalism, you’re not hearing us right.
We believe the notion of business can solve any problem.
We just want the government out of our business.
Until the cross-eyed dopes in charge of our city, state and national government stop interfering with the natural flow of things, the big will get bigger and the small will disappear.
That’s why stocks – which represent the biggest of the big – will keep on soaring.
It’s because of all this money printing… all these lopsided handouts… the manipulation of interest rates… and the COVID police kicking folks out of small stores and all but handing them Amazon gift cards… that the Dow is destined to soar to 100K.
No. It’s not good news.
But if you want to survive it all, you’d better own some stocks.
P.S. We recently released a video with full details of the situation, including the five steps to take right now to avoid the devastation that’s ahead. Click here to watch it.
Has the government gotten in the way of or hurt your business? Share your story at email@example.com.