Americans Cut Back as Income from Wages & Salaries Hit Record as 10 Million People Still out of Work: Weirdest Economy Ever

Meanwhile, away from the stock market mania…

By Wolf Richter for WOLF STREET.

Income from wages and salaries that consumers earned in December ticked up to a new record, as high earners and executives were making lots of money working from home though 10 million other people, mostly lower income, had lost their jobs; and income from unemployment insurance for those less lucky ones jumped. But spending on goods fell again as Americans cut back after the binge, and spending on services remained at dismal levels.

Income from wages and salaries, including from self-employment, rose by 0.5% in December from November, to a new record of $9.67 trillion (annual rate), according to the Bureau of Economic Analysis. This level “in aggregate” of all earners combined reflects that many people, particularly high earners, have done exceedingly well during this pandemic even as 10 million others – many of them lower-paid workers – lost their work and remain out of work:

So the Bureau of Labor Statistics reported that in December, nearly 10 million more people were out of a job than had been at the end of the Good Times in February. And the Labor Department reported that 16 million people were still claiming state or federal unemployment benefits at the end of December.

The chart below shows the results from the BLS survey of households (red) and establishments (green), in millions of people with jobs. The blue line indicates the progression of jobs needed to cover population growth:

So lots of people have lost their work. But many people working from home have done exceedingly well, and executives have done superbly well. Executives getting raises and bonuses worth millions of dollars lifts an entire income bucket full of low-paid workers. In addition, quite a few industries have boomed due to the shifts during the Pandemic – including real estate and ecommerce and everything around ecommerce, from warehousing to transportation.

Income from unemployment insurance (UI) jumped 14% in December to $321 billion (annual rate), from the crisis low in November. During the peak in June, it had exploded to $1.40 trillion, powered by the new federal unemployment benefit programs.

The new $600 stimulus payments started pouring into bank accounts on December 29. Some of these payments may have been captured in today’s data. The BEA adds stimulus payments to welfare and other payments, which before the Pandemic amounted to roughly $500 billion (annual rate). In December, the combined stimulus and welfare payments rose 5.6% to $654 billion from November.

UI, stimulus, and welfare combined jumped by 8.3% from November to $975 billion (annual rate) in December but remain much lower than the huge spike in the spring:

This produces the Pandemic Money Overshoot, with stimulus and unemployment payments (red) generating much more income than was lost in wages and salaries (green), which is in part what triggered the Weirdest Economy Ever:

Income from other sources in December inched down 0.6% from November and fell by 1.7% from the Good Times in February. Below are the changes from the Good Times ($ amounts in annual rates):

  • Supplements to wages, such as employer contributions to benefit plans and social insurance: +0.5% ($2.76 trillion)
  • Proprietor’s income, farm and nonfarm: -6.8% ($1.64 trillion)
  • Rental income of persons: +0.4% ($805 billion)
  • Interest & Dividend income: -0.9% ($2.95 trillion).

Government transfer payments to persons under Social Security, Medicare, Medicaid, and the Veterans Administration rose by 5.7% from February to $2.78 trillion (annual rate). Though Medicare, Medicaid, and many VA benefits are paid to healthcare providers, they’re considered “personal income” because patients are the beneficiaries of the services.

Personal income from all sources in December ticked up 0.6% from November, which had been the lowest since March, to a seasonally adjusted annual rate of $19.57 trillion, according to data from the Bureau of Economic Analysis today. It was down 7.2% from the stimulus-and-extra-unemployment spike in April. Compared to the Good Times a year ago, total personal income was up 4.1%. The actual income for all of 2020 was $19.73 trillion, for an average of $1.65 trillion per month:

And Americans cut back.

Total consumer spending in December edged down 0.2% from November to $14.49 trillion (annual rate), the second month in a row of declines. Compared to the Good Times a year ago, spending was down 2.1%. The decline was due to bigger drops in spending on goods, particularly durable goods.

For the year 2020, the surge in spending in the summer and fall didn’t fully cover the hole in the middle and fell 3.1% from 2019, to $14.65 trillion.

When adjusted for inflation, spending in December fell 0.6% from November. For all of 2020, and adjusted for inflation, spending fell 3.9%.

Spending on durable goods fell 1.0% from November and 3.6% from October, to $1.73 trillion (annual rate), the lowest since July. But this was still up 13.0% from a year ago as consumers had spent a portion of the Pandemic money on laptops, smartphones, appliances, new vehicles, or rowing machines – I just learned that the models by the most established brand are still on backorder. Many of these products or their components are imported, leading to a record trade deficit.

For all of 2020, durable goods spending jumped by 5.6% to $1.62 trillion, despite the hole in the middle.

Spending on nondurable goods declined for the third month in a row, in December by 0.7% from November, to $3.08 trillion (annual rate), the lowest since June, but was still up 2.5% from a year ago. This includes food, gasoline, tissue paper, clothes, and the like. For the year 2020, spending on nondurable goods was up 2.2%, despite the plunge in the middle:

Spending on services was essentially flat in December with November, and at $9.6 trillion (annual rate) was down 5.4% from a year ago, and was down 6.1% from the Good Times February.

For the year 2020, spending on services dropped 5.4% to $9.49 trillion. Services matter. And they’re mostly produced in the US, rather than imported. They accounted for 65% of total consumer spending in December and include rents, healthcare, insurance, plane tickets, education, hotel bookings, movies, wireless subscriptions, etc.

It looks like the Pandemic-driven purchases of goods, particularly durable goods – from equipping a home office to installing a hot tub on the deck – are backing off. And spending on services is still dismally low, given the many restrictions that impact services.

For some Americans, 2020 was great in financial terms. They made more money than ever, their investments and home values were inflated by the Fed’s $3 trillion QE, and they’re exuberant, and they bought goods they wouldn’t ever have bought otherwise, and they spent money on goods that they would have spent on services such as vacations at far-flung locations. But for many other Americans, 2020 was a horrible year, where everything fell apart.

GDP fell by 3.5% in the year 2020, the worst annual decline since 1946. Trade deficit in Q4 hit new all-time worst. Read… The Year of the Plague in Charts: Weirdest Economy Ever

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  319 comments for “Americans Cut Back as Income from Wages & Salaries Hit Record as 10 Million People Still out of Work: Weirdest Economy Ever

  1. WES says:

    So those who have jobs, had a great year making more money than ever.

    So those who lost their jobs, were given higher paying government jobs making more money than ever.

    So everything is great!

    Why don’t I feel so great?

    • Joan of Arc says:

      The first Federal stimulus package provided Federal unemployment benefit payments of $600 per week on top of State unemployment payments. The second Federal stimulus package provided Federal unemployment benefit payments of $300 per week but the second stimulus bill also somehow reactivated State unemployment benefit payments that had run out and were exhausted…so the average unemployment benefit payments from the second Federal stimulus bill probably averaged $600 per week when combined with the newly activated State unemployment benefit payments. Those stimulus bills are composed of hundreds if not thousands of pages and no one really reads them, especially the US Senators and US Representatives.

    • Anders says:

      You don’t feel great because everything is financed by debt. 27 trillion and counting. Just like the Roman empire … one day it will all be gone.

      • nixonland says:

        @anders….yawn…..thanks for the bedtime story pal

      • Millie Brown says:

        If you are look at the debt clock the 27 trillion is manipulated. The actual outstanding debt is the bottom left quadrant “derivatives” where the estimate is between 300-600 trillion. No amount of austerity will pay that bill.

        Wanna guess how many millionaires a trillion can make? A million. Wanna guess how many millionaires a quadrillion can make?

        • Wolf Richter says:

          Millie Brown,

          The debtclock is an algo and a silly joke.

          The US Treasury debt is made up of Treasury securities, and each one of them is known and accounted for. They’re traded in the markets, and you cannot manipulate the number and face value outstanding, though you can manipulate the price and yield as the Fed does via its monetary policies.

    • leanFIRE_Queen says:

      > Why don’t I feel so great?

      Because you know that’s temporary.

      Wages are resetting lower across the board thanks to remote working, globalization and automation.

      A great thing imho, we have to aim at being competitive. Inflating housing costs doesn’t make American workers more competitive against a global work force.

      • Cashboy says:

        leanFIRE_Queen

        “A great thing imho, we have to aim at being competitive”

        Competitive at what?

        I read so much that the USA have outsourced manufacturing to China; that it is not worth fracking for oil because of the low world oil price, minimum wage will be US$15 per hour.

        The average Thai worker manufacturing Toyota cars (well paid job) gets US$660 per month for a 45 hour week.

        So who is the USA you going to be competitive against?
        Anything the USA designs is copied quickly and on the market fast by China and china is just getting good on the technology side thanks to the west outsourcing it.

        • Petunia says:

          What you don’t get is as wage levels drop, so will prices. All those $15HR workers can never afford the high rents the rentiers expect. The rentiers too will take the hit, eventually.

          So reset away, and watch corporate incomes drop with the general price levels.

    • raxadian says:

      There is people who keep their jobs but made less money.

      Or had to take pay cuts because they are now working from home.

      There is people who lost their jobs and haven’t got a new job yet.

      Yay!

    • NBay says:

      Maybe don’t exercise enough? Overweight? Take too many meds? Bad diet? Too much Fox? Don’t have enough “stuff” yet?

      Just suggestions.

      • NBay says:

        That all colored in chart kinda proves Twain right;

        “Go ahead, give the poor all the money you want, the rich will have it all before nightfall, anyway”

  2. Keppered says:

    It’s all by design.
    The few will gobble up anything I do not let go.
    Then the lenders will gobble up all that I cherish.
    And I never ever carried debit of any kind. -K

  3. Farm Hick says:

    Here in flyover land, we can’t find workers who want to work. The pork barrel
    Stimulus package of giving an extra $600.00 or $300.00 a week over unemployment benefits is insane. Unemployment was meant to get a person or family through a tough time, not buy big screen TV’s, hot tubs and new vehicles. This will not end well for the United States. That stimulus money should have been used for an infrastructure package and keep that money in the U.S..

    • keppered says:

      Oh mr farm hick ..
      it’s a tough one feeling remorseful about yourself as others clearly suffer a harder fate in life…. ain’t it?
      How your doing in “flyover land” during the ronald reagan / bush years when they invited everyone from all over the world to come to fly over to work?
      JUST TO BUST THE UNIONS and DESTROY THE MIDDLE CLASS?
      Two questions mr. hick…
      Why you think a couple 300 dollars per poor slob and others gonna hurt?
      Why you think your piddling tax contributions could even catch up to the simple happiness and basic relief this tiny amount WILL bring to fellow Citizens?
      Never mind,
      -k

      • RightNYer says:

        Providing “happiness” to the people through printed money to splurge on durable goods is not a proper function of government.

        • polecat says:

          It might be, when those formerly ‘durable’ goods crap out.

          In my mind, happiness is a functional clothes washer … not some rocks to beat the dirt out!

          It’s all or nothing with you calvinistic Ideologs!

        • RightNYer says:

          Okay, but that argument can only be used to justify UBI, not stimulus or pandemic relief. If someone hasn’t lost income, giving them money to buy foreign made washers is not stimulating the economy. If someone has lost income, then unemployment will not cause an increase in “stuff” buying, as they’re just trying to keep their heads above water.

        • Implicit says:

          The health of capitalism is directly related to it’s citizens’ work ethics. This would seem to be intuitively correct.
          It’s fine as long as you don’t call it capitalism anymore because it’s not.
          Nothing is perfect, economic philosophies come, and go in cycles.
          There’s a lot of things that could be done to try and fix this capitalism, like allowing a recession. Bring back Glass Seagull, prevent lobbyists bribes, break up the big monopolies..
          hat’s a good start, then you can get to the real ethical stuff that most ignore that would save money : stop the drones from killing innocent people and calling it an accident of war in the middle East. Hold the programmers
          and those in charge that let the algorithims commit murder responsible, I think that yuse science and math to write the algorithms, what could go wrong?

        • leanFIRE_Queen says:

          Decent people complain about this when Greenspan came up with his demented “wealth effect” inflating housing costs and during Bernanke’s QE insanity.

          Not when the poorest among us are finally given a break after policies that relentlessly take from them to give to asset owners like the landowner above. We should just increase land taxes IMHO.

        • RightNYer says:

          I’ve been actively decrying the Fed’s actions since Bernanke (I was too young during Greenspan’s reign to really understand what was happening).

        • keppered says:

          Why not?
          They do it all the time.
          If a little bit of help can bring a simple easement I am in favor.

      • Ed C says:

        Why the hostility?
        It is common knowledge that generous unemployment benefits remove the incentive to work.
        Smart-ass lecture not needed or appreciated.

        • Nick says:

          There are no jobs for people to go back to!!!! That’s the point!! Why would a bartender who can make several hundred dollars a shift possibly going to school to better his life want to move to a podunk town and work a farm labor or worse meatpacking job for $10 an hour??? He’s competing with 3rd world Somalis and Mexicans. Do you expect college educated laid off workers to do the same? As the article states executives and those who just happen to be in the right career are doing great! You sound like the idiot politicians who think oil pipeline workers can just go build solar panels or learn to code. America is dying because of the “I got mine, eff you” mentality.

        • nodecentrepublicansleft says:

          What’s even worse?

          My neighborhood is full of “Welfare Queens” driving BRAND NEW Teslas!

          Giving $$$ to corporations and rich people that don’t need it (DJT’s tax cuts) is good! Giving $ to poor Americans makes me sick. I’d rather children starve than a rich guy lose his vacation home or yacht.

          Remember when they asked John McCain how many homes he owned? He wasn’t sure how many!

          And didn’t Ayn Rand end up living in public housing and cashing her SOCIAL(ism) Security checks?!

          Oh those GOP rubes…they just keep voting to slit their own throats don’t they?! :)

        • A/C in SD says:

          Smart-ass lecture not needed or appreciated.

          Mr C, right on. Some of the commenters on this blog have degenerated a good bit over the past many months. Covid related no doubt!

        • keppered says:

          Oh Nick American way of life is dying when the bummer attitude took hold

      • ross says:

        Zzzzzzzzzzz

      • Happy1 says:

        Unions in the public sector enrich themselves at the expense of the taxpayer. Unions in the private sector eventually destroy the industries they dominate because someone else will do it both better and cheaper (see UAW). So they are a great deal for the people who get them for the 20 years or so until disruptive businesses undermine their inherent wage and work schedule inflexibility.

        • nodecentrepublicansleft says:

          The little people who worked at a VW plant in rural BFE Tennessee a few years ago voted against having a union.

          A VW executive flew from Germany to address them. He said: “Individually you can beg….collectively, you can negotiate.”

          He did what was better for the worker then the corporation. My father, who was in WWII, would roll over in his grave if he knew Germany companies treated their employees better than US companies.

      • Lisa_Hooker says:

        @keppered – if we just gave them much bigger checks they would be much happier.

        • keppered says:

          Who are they?
          You and me?
          This is not the future our fathers left us.

        • Lisa_Hooker says:

          keppered you have that so right. This isn’t even close to the future I anticipated 20 years ago – when I was in the future anticipating business.

        • NBay says:

          Kep-

          Forgot the who is “we” that “gives” part.

          Anyway, “future anticipating business”? Cool!
          Like a writer for Popular Science?

    • Felix_47 says:

      I have tried to hire domestic workers. The problem is that they don’t see the pay rate as worth their time. They show up for a couple of days and then we see them no more. We hire only Central Americans and when we need help our workers recruit their friends and family members from their villages. They are happy to work doing roofing and general construction labor. And they do not do so many drugs on the job which is a big plus in a high rate worker’s comp environment.

      • keppered says:

        I beg to differ Felix,
        Only because your statement echoes year after year of ignorance towards other peoples time and management compared to yours.
        Perhaps your sense of time and management differs from others?
        Perhaps we dig a little deeper?
        “We hire only Central Americans and when we need help our workers recruit their friends and family members from their villages.“
        God bless you !!!
        DO YOU TREAT YOUR WORKERS FAIRLY?
        OR send them away as no good “Domestic Workers” as a problem when something ain’t right?
        Now I can go on ,
        Do you have profit and loss issues?
        Do you own the property under your business?
        Do you abide by the United States Federal and Local laws as will as …….
        All the rest of them.?
        Don’t b….S…. me boy you find one good down to earth hard living boy or girl they will buy your business out and still make sure you and yours are taken care of.
        From Central America or saint Louisiana.
        Peace out

      • gnokgnoh says:

        It’s a sad state of affairs when your salary for domestic workers cannot compete with $28,800 per year under the UI stimulus program. The 2020 poverty threshold for a four-person family in the U.S. was $26,200. Try supporting a family on that income. The stimulus was designed to do exactly that, help a family that had lost their job reach poverty level. A single wage earner family suffered the most. One reason that many families had surplus was because of two wage earners, when only one lost their job. Often, the second wage earner was earning less than the UI stimulus payments. They had no time or resources to means test benefits, which happens for most state UI programs. Have a heart. Some poor people actually did better for a little while. It won’t last.

        My brother and his wife are professional musicians in NYC, all gig work, managed to eke out a nominal living, month to month and were fine with that. Good luck to them at the end of this pandemic. They have taken retail stocking jobs during the Christmas season, but those were seasonal. They’re gone and so are many, many theater and musical companies…they will survive because both have other skills, but, sheesh…

        • Joe Saba says:

          My brother and his wife are professional musicians in NYC

          you said it all in 1 statement
          guess those MUSIC DEGREES aren’t working out to well
          maybe they should find ACTUAL WORK INSTEAD

          I like music, played in band when young and then realized I NEEDED TO HAVE A CAREER(or 3) and MAKE MONEY TO SUPPORT FAMILY

          so I worked hard, lived WITHIN our means and SAVED/invested

          finally after 30 years WE NOW HAVE GROWN UP FAMILY(with KIDS who have skills and ARE WILLING TO WORK)
          now we have 5 more years to SAVE SAVE SAVE for retirement
          but we have good foundation

        • Petunia says:

          Joe,

          The majority of professional musicians in NYC don’t have degrees. They have been practicing their craft since childhood. They can make a very nice living, with Broadway, concert venues, the club scene, recording sessions, etc. It is a business based on reputation and skill.

          While they can make a lot of money, many are not good at managing it, which is why they have the reputation of being broke. But I knew many that did very well.

        • GirlInOC says:

          Oh lordt. Another “artists should get a REAL job!” comment.

          After months of being stuck at home to watch movies, read books, listen to music, learn a craft… all made by artists… people still think everyone should be an MBA? Or whatever job doesn’t require student debt but makes 6-figures to be able to afford houses & children & debt free life? It’s just so odd to hear that so often here when irl, I know plenty of wealthy/successful business people that value the arts and go out of their way to support artists. Most of them know what dull lives they’d live if they were forced to be around people like themselves.

        • keppered says:

          A threshold you stated is not the same as poverty level. Sadly slice it by a quarter. A major discrepancy AND major theft of middle class income come from construed financial data.
          The construed data lends to the belief we are all doing OK or better then which we are.

          That’s the hateful of what is transpiring, we are being killed softly with their song.

          Personally I think the show will go on a much longer.
          Don’t lay down and roll over.

      • Cas127 says:

        Felix,

        New home sale prices have *doubled* in the last 20 years, during one of the worst periods of US employment growth ever.

        By destroying interest rates paid to savers, the Fed’s ZIRP has handled an inconceivable windfall to home builders (by grossly perpetuating the “affordable monthly pmt” scam that allows builders to Jack actual sales price).

        And, yet, the builders are so desperate to screw down their labor costs (despite doubled sales prices) they eagerly and openly engage in widespread criminal activity to import millions of illegal aliens.

        I don’t think the problem is with your US candidates.

        • Joe Saba says:

          actually in past 20 years the FED has DEBASED THE VALUE OF $dollar by 1/2(ie need DOUBLE FOR SAME VALUE)

          I don’t think the problem is with your US candidates.

          how so 1% builders OWN our candidates which is why CORRUPTION RUNS RAMPANT in DC/states

          just remember that YOU WORK FOR STORE and BUY FROM STORE at STORE PRICES
          don’t like – no problem but there are NO ALTERNATIVES LEFT NOW

        • Depth Charge says:

          “…actually in past 20 years the FED has DEBASED THE VALUE OF $dollar by 1/2(ie need DOUBLE FOR SAME VALUE)…”

          But wages haven’t doubled, so your argument as it pertains to housing prices is bunk.

        • Joe Saba says:

          But wages haven’t doubled, so your argument as it pertains to housing prices is bunk.

          and yet I’ve managed to go from $80 an hour in 2000 to $40 in 2020 and STILL CAN BUY
          of course I bought in 2009-2014 when prices were reasonable
          but not in 2006-2008 when to high
          so right now you DO NOT BUY
          but maybe in couple years prices will slack off and then you buy
          but hey you can call it bunk – but truth hurts

        • joekid says:

          I agree, another example is the American agriculture industry , heavily subsidized while employing a large workforce of ILLEGAL aliens.

      • Heinz says:

        It looks like new US administration is pulling out all the stops to hobble ICE and encourage more illegal immigration.

        I think in future you will have more cheap Central American workers than you know what to do with.

        • Joe Saba says:

          I live in Tucson – 80 miles from border
          been here 35 years now

          I can tell you there is NO SHORTAGE OF WORK at decent wages
          but you have TO WORK

          friend of son – was building wall and made $2,400 a WEEK
          now he’s out of work – oops now working at HOMELESS DEPOT for $12 an hour

          he refuses to take UI and has 2nd child on way

          so much work and to few WILLING TO WORK
          the woke folk are comfortable playing their games on TV and sedating themselves with MJ’s

        • Anthony A. says:

          The home builders will be overjoyed!

        • cd says:

          11 million is a joke….my mexican cousins even laugh at that number….30 million will come……get ready…..this is not your 1980’s amnesty anymore……no american should pay one penny for any illegal alien, ever……..go to any other country see it it works…the 2 headed corpocracy party snake is killing america……that’s the real issue…

        • nodecentrepublicansleft says:

          BOOGIE-BOOGIE-BOOGIE!!!!
          The HORDE is outside my door right now!!
          HELP!!!!
          Ahhhhhhhhhhhhhhhhhh……..

          Hey, take a look around you.
          See all these really serious problems?
          See the botch Covid-19 response?
          See the corporations / Wall St. / Banks/ Big Pharma running roughshod over little people?
          See the opioid crisis?
          See the lack of healthcare, education, etc.?
          Notice a mob sent by a US President to interfere w/certification of an election he just lost? That’s called a Coup Attempt.

          None of these have anything to do with some poor brown people fleeing violence. Are you an American Indian?

          Probably not, which means your people came here from somewhere else too.

          If a poor person from Honduras can take your job, you must have little to no actual skills. Your priorities are wrong.

        • keppered says:

          Kind of like what ron regan did as a way to destroy the american middle class? He signed executive orders, forced legislation, turn his back on strong policy and destroyed the labor unions by enacting strong border laws and not enforcing them.
          Hence we have our brothers and sisters with us and they have been among us for four decades.

          YOUR argument is old and tired and completely unknowingly, all though I hope you try to educated first yourself and then those who may be near you!

      • Implicit says:

        Aliens are unable to get on welfare, and to live properly demands a good work ethic. Just a very general observation please don’t shoot me. Rough crowd today

        • Dan says:

          Once they have citizen children, the parents can get housing assistance, food stamps and cash. California offers Medi-Cal coverage to undocumented adults. Haven’t you heard?

          Private charities do not discriminate and offer housing, food and shelter to non citizens.

        • Anthony A. says:

          Having a child born in the U.S. gets you on the welfare, ADC, food stamp, etc, train.

        • Paulo says:

          It is a rough crowd, Implicit. I don’t know if it explains the lack of civility these days, or reflects it.

          I don’t like the name calling and snide comments when the real issue is just a difference of opinion.

          Sometimes people need a hand up, especially if they do not have family that can help.

          As for the comments about ‘illegals’, reminds me of the Italians, Irish, Poles, Okies, whatever group is in vogue to denigrate and demonise. Migration will occur, and always has. Climate change will bake it in. Two choices, buy guns or buy bread, and hope it isn’t you that ever needs a smile.

          Cities like Phoenix are unsustainable. Most of the SW is living on borrowed time. Where will you and/or your children move to? How do you wish to be treated?

        • Cas127 says:

          Paulo,

          “Migration will occur, and always has. ”

          One of the great lies of the Left regarding illegal immigration (which in reality is a barely concealed ploy to create political advantage) is to somehow pretend there is *no immigration* if *illegal* immigration is halted.

          (The ploy? The “demographic inevitability” Dems like to ballyhoo…while obscuring its criminal origins)

          The US has large annual numbers of *legal* immigrants who follow the rule of law of the country they are coming to reside in.

          For those legal immigrants, their first act in this nation isn’t criminal.

          The millions of illegal aliens (and their US financial and political Co conspirators) are simply placing the immediacy and primacy of their personal desires over the rule of law…and have been unapologetically doing so for decades.

        • VintageVNvet says:

          Been knowing folks who came here legal and otherwise for several decades, at least back to mid 1960s.
          In those days, folks from all over the world came here to work to earn more than they could at home, and send most of it back home to support family, etc.
          Still pretty much the same thing happening recently with folks from all over Asia, ME, Europe, south and middle Americas,,, every region of the earth coming to do better, never mind any BS excuses from them or from corrupt crony capitalists in USA who know full well they can exploit hard working folks, at least for a while, for cheap labor who will work hard for much less. ( These days I believe $5/hr is going cash rate.)
          Exactly why majority of rich folks supported any and every likely candidate anti former POTUS politician with millions,,, millions that will soon be ”realized” as extra profit due to $5/hr instead of $15/hr for one glaring example.
          This kinda stuff been going on here in USA since one of my alleged ancestors came over in the Mayflower as a slave, so said some group that denied a relative a college scholarship on account of that.
          And the ”holier than thou attitude” has been here as soon as some early English folks found they could use it to drive down the cost of the labor of Germans, Irish, others from Europe north and south,, and so on until today.
          German ancestor had to change his name or lose his job in anti German hysteria WW1 era,,, Irish ancestor had her name changed at Ellis Island, along with her entire family,,, or they could choose to go back to Ireland in the midst of famine, etc.
          USA will change,,, and keep on changing,,, and we can all do our part to at least try to keep those changes moving us toward more democracy and actual capitalism.

        • GirlInOC says:

          Ok, just a quick issue with this line of thinking. Only 1 in 5 people eligible for housing assistance are able to access it. Unlike food stamps, which is accessible to any citizen (not undocumented workers) based on income, housing assistance has wait lists that are so long most states have them closed. There are NO housing guarantees for the poor. And housing prices are unaffordable for min wage workers in every state.

          There’s a reason housing advocates have been sounding the alarm these past months. Housing was already unaffordable, before Covid. For the poorest among us? This is an emergency & necessitates aggressive funding. I’d argue regardless of citizenship & based on humanity. But I know that’s a tough concept for some.

        • Implicit says:

          Paulo, My parents were aliens, and didn’t get their green cards until I was 8yrs. old. They were very hard workers, and managed to get us (6 kids) out of a triple decker in the city. Initially my dad was denied work work due to NINA- No Irish need apply, but was later hired as a scab welding rebar at the old Boston Garden. They taught us all a good work ethic. Showing -up is half the ballgame.
          Presently I work part time (25 hrs/wk) while collecting SS. I have been fortunate enough to not miss any days of work, unless scheduled since starting this retirement job 7 yrs. ago. I have worked with challenged individuals my whole life, orthotics and prosthetics for 35 yrs, with 30 at my own small facility. In my retirement job I still work with challenged adults, not just the physically impaired individuals. I have always had empathy for the less fortunate
          My dad only had a 6th grade education , but he was very smart. When I asked him how he knew how to do so many things, he responded “I had to because we didn’t have money.”

      • Jeff says:

        Felix,
        Perhaps you could tell us specifically what $/hr you’re paying that results in the problem you’re experiencing. I’d also wonder what the cost of living is there.
        If posting the actual city seems too non-anonymous, just think of a different city with similar costs.
        It’s not difficult to understand your complaint, but some actual specific data points would be very useful. If you’re offering $10/hr in San Jose CA, then I have an idea of what the problem is.

        • Bruce A Forbes says:

          Paulo
          There has been very little “climate change” since this issue was raised about 30 years ago. Of the approx. half degree C of warming since then, it is unknown how much of this is man-made and how much is natural variation. There has certainly been no evidence presented that justifies the present hysterical catastrophic man-made global warming conjecture that pervades the news media. We have much more important, real problems to address.
          I appreciate the quality of you contribution to this blog, but I sincerely suggest that you reconsider the evidence on this issue.
          Best
          Bruce

        • Cas127 says:

          Well, basically crickets from Felix so far.

          Perhaps he will respond and it would be particularly useful if he honestly responded with what he offered to legal American candidates per hr (total comp) vs. what he has been paying illegals (total comp…but common 30% benefit premia very unlikely because they would leave a paper trail back to initial criminality).

          Again, this is all playing out against a backdrop of,

          1) a *doubling* of new home prices over 20 yrs,

          2) powered by DC’s ZIRP gutting of savers’ interest,

          3) allowing homebuilders to rapidly double home sales prices while keeping all important “monthly payment” dangle constant,

          4) during a period which has seen some of the slowest employment growth in US labor in US history.

          But the huge ZIRP subsidy isn’t enough, outright criminality has to be employed in order to ensure that the huge ZIRP expansion in margins accrues solely to homebuilders.

        • 91B20 1stCav (AUS) says:

          Bruce-suggest you reconsider the evidence on climate, FRESHWATER and its recharge rates vs. mountain snowpack/glaciers in the American west (see current levels Lakes Mead and Powell, falling aquifer levels in California’s Central Valley and the plains Oglala aquifer. A push is on now in Nevada to take water from the Ruby Mtns. in the northeast because Lake Mead can no longer supply Vegas’ requirements vs. the other straws that are in it) especially in a time of growing populations demanding even more from their environment. The development assumption was that plenty of freshwater could always be found-but those resources are in a current, serious, decline. Paulo is right (and not only about Phoenix) concerning the sustainability of large populations in what were semidesert or desert areas to begin with.

          We could go on to areas dependent on glacier-fed rivers, such as Southeast Asia from the Himalayas, but we won’t.

          Breathable air doesn’t come out of the sky, freshwater from a tap, or food from the supermarket. Perceived small changes in temperature can and does have a very large effect on all of these things that civilizations and our species need to survive. The planet cares not whether we make it or not, taking care of that which takes care of us can hardly be considered ‘hysterical’ imho.

          Best to you, Bruce, and-

          may we all find a better day.

        • NBay says:

          Yeah, literally 100’s of million years for all that carbon to go from CO2 to C-Hn. And then only 150 or so to reverse it all. A very natural process, to be sure. And Paulo is up there where the ice is melting big time, so what would he know?
          At least we finally get a Northwest Passage (although that was more the age of sail dream). But it will burn a bit less fossil fuel, anyway, and it looks like Canada has the best dibs on it.

      • NBay says:

        Not to worry Felix. Your biz will be scaled up and/or eliminated by the corporations, and you, or whoever might have inherited it, will find a place amongst the corporate slaves, or end up in a ghetto, or both, and maybe even homeless. But in any case, being despised for begging for scraps from an ever shrinking “democratic” government. This “program” has been going on a long time. You likey have even been voting for and promoting it.

        Being a trusted and respectful domestic in the “big house” may yet again become one of the premier “jobs”, working for those few with a “position”, not a “job”

        Anyway, your current “labor management” problems are close to an end, FWIW.

      • Gordian knot says:

        I can always tell when somebody has a employee mentality. Less than five percent of people have ever been self employed and probably less than one percent have employed a significant staff twenty, thirty or fifty employees. These commenters who hate on you are ignorant people with strong opinions. I employed fifty people in the dry cleaning business and i have to agree with felix 47 the latinos work circles around other workers and are reliable the asians (hmongs) were very good retail clerks.

        • Cas127 says:

          Gordian,

          You define “good employee” as someone who will maximally break their back for minimal pay, in order to maximize *your* income.

          Fine, you want to maximize your business income (while *not* maximally breaking your *own* back…you are perhaps working very, very hard…but you aren’t working alone).

          Again, very understandable and very human.

          But don’t denigrate (“employee mentality”) those who have not given themselves over to what, in the end, is *your* agenda (*their* maximal effort for *your* minimal payout to them).

          In point of fact, they are making the exact same effort vs. return calculus that *you are*…except they are negotiating against your short/long term interest so it pisses you off and you wrap it in a philosophical agenda (“can’t find good help anymore…ie, they all want to be paid more now that business revenues have doubled, what lazy *ssholes…)

          The middle path is to have workers who energetically contribute to the growing profitability of the business…*but then share in that profitability of that business through higher wages*).

          This all started from my observation that 20 years of Fed ZIRP, while impoverishing savers, has doubled the prices of new homes (by creating affordability illusions via keeping the monthly mtg pmt flat).

          Yet, despite this doubling of homebuilder revenues (during one of the worst periods in US economic history) the homebuilders are *still* so dissatisfied that they are willing to engage in large scale criminality (illegal immigration facilitation) in order to *fully* screw down their labor costs.

          I’m not on board as seeing that behavior as some noble, beneficent enterprise.

          And I’ll also say it is a pretty short sighted “owner mentality” because it incurs big risks (employee apathy, labor unrest, criminal consequences, etc) all for the sake of what likely amounts to cost increases that could be accommodated in the context of revenue doubling.

        • cb says:

          @ CAS127 –

          Impressive response to Gordian. Worth saving.

          I believe I remember you managing or owning apartments. I think your same argument could be applied to landlords. After all, rental property is useful to the extent that it siphons productivity through the renter to the rentier.

          Pretty much the same argument could be attached to renters of money.

        • Cas127 says:

          cb,

          1) No, not an apt owner. I’ve just thought about ZIRP a lot and my sense is that the Fed’s “plan” circa 2001 (and non course corrected for 19 yrs as the country fell apart) was that gutting rates would empower purely domestic industries (shielded from intl competition) to greatly expand output and employment via greater mtg affordability.

          2) The homebuilders responded by instead doubling new home prices and keeping affordability and wages/employment flat.

          3) And that ZIRP windfall (relative to non debt contingent industries) *still* wasn’t enough for homebuilders, despite doubled revenues and everything that suggests about their profit margins.

          4) The builders *still* have to roll out the old saw about “lazy Americans who won’t work 100% accruing 100% to my own benefit” and engage in mass criminality in order to generate the necessary labor supply leverage.

          5) Broadly see your pt about rents/money arbitrage but I’ll have to think about it for a while.

          It is the players engaged in two sided screwings powered by ZIRP that tend to irritate me the most.

          (Homebuilders who have jacked prices while using crime to screw down labor costs and CDO makers who market doomed consumer debt and then feed it to ZIRP starved savers)

        • NBay says:

          “Employee mentality”…….Us worker bees are just stupid, Knot, why else would we be worker bees?

          That’s your thinking…..which justifies treating us as commodities, (Human Resources…the HR dept) not people….just put us in warehouses or back in the dirt as your business needs require.

          And always buy at the lowest possible price for best ore grade possible, like any other commodity purchase, and not one penny more….that’s YOUR hard earned money.

        • 91B20 1stCav (AUS) says:

          Brings again to mind Paulo’s “…you pretend to pay us, and we pretend to work…”.

          may we all find a better day.

        • Engin-ear says:

          @Cas127

          I think you miss the point.

          It is not about employer-employee duality.

          It is about being active or passive in life.

    • Tom12 says:

      Dont worry.
      Help is already on the way from the south.

      • Anthony A. says:

        And the Wall won’t stop them! (maybe I should have commented in Spanish?)

        • Implicit says:

          Brazilians speak Portuguese, and in general exhibit a great work ethic. I would hire one in a heart beat.

      • Joe Saba says:

        been going on for 50 years now
        over 1/3 our population is hispanic

        yet PROFESSIONALS are busier than ever making good living

        but you know THEY HAVE SKILLS and ARE WILLING TO WORK

        • Anthony A. says:

          Joe, it’s 40% Hispanic here (Texas). I really need to learn their language.

          I hired a crew to paint my house. When the head guy, who spoke some English, was not with the crew (went to another job for a bit), I could not communicate with the painters.

          I also speak fluent Lithuanian, and leaning Spanish is soooo different. LOL!!

        • David Hall says:

          No ethnic group in California has a majority. The Hispanics are the largest ethnic group in California. A number of these are not old enough to vote. The Asians are the fastest growing ethnic group in America and have a higher median income than Caucasians after Asian professionals immigrated to the US.

      • 91B20 1stCav (AUS) says:

        Historically, a goodly part of this issue seems to devolve from a ‘low-paid working population vacuum in wealthy societies’. One nation’s ‘low (and avoided) pay’, however, is a step up to those in a neighboring land. How much, as a business owner, do you choose to honor your own country’s immigration laws over your personal profitability? How easy is the victim-blaming of workers from either side of the border? (a big tip of the helmet to Cas/NBay).

        may we all find a better day.

    • Could be the workers in flyover land are in Washington trying to overthrow the government? How much of that UI money is being spent on AR-15s, ammunition, and para-military equipment? What’s left is donated to dubuious political causes, and hate groups. The failure to post an infrastructure bill the last four years was a blessing of sorts, before the priorities were set. Security is now a top concern, and health security. Rural hospitals came up short in the pandemic. Be a shame to spend a trillion on potholes while the Russians are in our computer systems, Covid is everywhere, and terrorism is making a comeback.

    • NBay says:

      Like a Green New Industry? And fixing/upgrading other useful infrastructure that goes with it?

      And while you may know people who bought bigger screens or hot tubs, I sure don’t. The new crap vehicles, sadly, yes, although mostly used new crap. Lotta folks can’t live without transport.

      BTW: whatever happened to that stupid marketing driven “how many ways can your PU tail gate bend?” crap? I never have seen anyone showing their’s off. Marketing seems still very much in charge at US vehicle corps, sadly.

    • Lisa_Hooker says:

      Here in ghetto land, we too can’t find workers who want to work.

  4. Satya Mardelli says:

    Wolf – any parallels to Japan? I understand that Japanese became savers about 30 years and still won’t spend excessively. It appears that Americans suddenly have slowed down consumption and are now pouring every loose penny into savings/CDs and paying all credit card balances off each month.

    • Anthony A. says:

      Whoa! New cars and pickups are in short supply around here! Somebody is buying them,

      • el katz says:

        Anthony A. : The new cars are *short* because of the shortage of microprocessors. Assembly lines are being shut down due to a lack of components. Most of today’s new cars are rolling computers.

        • Anthony A. says:

          Really, I did not know that. Thanks!

        • NBay says:

          Actually they are rolling LANs. Look up CAN Buss and you’ll get the idea.

        • NBay says:

          Here’s a link to make things easy. And if you get an intermittent open/short anywhere the Buss goes, good luck. Shop instructor picked up $50K worth of new Saab convertible for $20K because nobody could fix it. He kept at it and finally got lucky playing with connections at radio and got weird symptoms (wipers went on, lights, horn, etc,) and narrowed it down and found cold solder joint.
          https://en.wikipedia.org/wiki/CAN_bus

    • Implicit says:

      Interesting. Believe that this spending won’t stay like this. People are already preparing before the next stimulus.
      I think your observation is correct. people are paying down debts, and will continue to do that more, at least till the free money stops coming in.
      It might be different than Japan long-term due to US export deficits

    • Happy1 says:

      Much if that has to do with the median age of the population, Japan has the oldest population of any country on earth.

  5. Keppered says:

    Let’s not forget the artificial earnings that falsely screwed the honest.

    • Wisdom Seeker says:

      The fake new money is as bad as the fake earnings. Cantillon Effect.

      When every transaction you make has a skim going to banks, government, and financial elites, it’s awfully hard to retain wealth.

      Even if you’re the one producing the wealth.

      Taxes are too high. Fees are too high. Corporate profits are too high relative to wages.

      • Anthony A. says:

        JPM Chase just sent me an email saying they are raising CC carry fees to 29.99% from 26.99%. Other fees are raised also.

      • Shells says:

        Vanguard has led the charge towards lower fees for financial products.

        That said, interest rates for student loans and credit card loans (and probably many personal loans) are still unjust in how high they are relative to libor and mortgage rates

  6. Paulo says:

    Maybe the sector on top did well last year, but unless folks are absolutely clueless there is a lesson to be learned from those who suffered.

    If it can happen to them it can happen to me.

    For those on WS who have gone through tough times I’m sure you will concur it leaves a lasting impression. And what can anyone do when times are tough? Cut back and prepare for declining income. They put the cancer pictures on cigarettes for a reason. Only a fool believes they are immune from misfortune. This is not a time to be complacent unless you are sitting on a big big pile of cash and hard assets.

    • DawnsEarlyLight says:

      “One man gathers what another man spills…”
      The Grateful Dead

      • Implicit says:

        True-things can change:
        “Now your hanging from the window sill, the same one you saw so clearly through before”
        Robert Hunter- Song writer for the Dead

        • 91B20 1stCav (AUS) says:

          “…the trouble with you is the trouble with me-got two good eyes but still don’t see…” -hunter/garcia

          may we all find a better day.

      • Lisa_Hooker says:

        Drivin’ that train, out of cocaine, dear Mr. Powell better watch your speed.

    • Clete says:

      Paulo, I agree. Having had a LOT of debt 10-12 years ago (when the real estate merry-go-round stopped down here in Florida) has made us very debt-averse these days.

    • Cas127 says:

      I think the only people who are *really* complacent (and perhaps now not so much behind their new wall and concertina wire – DC’s Brown Zone) are the political class that controls the money printing machine.

      The machine that has helped to paper over habitual policy f*ck ups for 50+ years.

      The machine that gives them everything and demands of them nothing (well, perhaps utter hypocrisy).

    • Lisa_Hooker says:

      Paulo – the coming inflation will do in all who are sitting on a big big pile of cash. Especially old farts on fixed incomes with no job.

  7. Keppered says:

    Beg to differ,
    Wall Street tough times, not since I recall. But I played a different score.
    Theses crooks are your friends, even if you try to join them.
    -K

    • Stephen C. says:

      Keppered, I believe Paulo typed WS referred to those Wolf Street readers who have ever experienced a rough time.

  8. Inno says:

    In a 0% interest environment, the only way to make a real return on your assets NPV is belt-tightening. I started in 2015, and have achieved an annual average rate of -5% YoY…

    Easy to do, when you start from a stupid spot…not everyone has that luxury.

    Rough times, I recommend one not pay attention to nominal values. Good luck to all.

    • Heinz says:

      “In a 0% interest environment, the only way to make a real return on your assets NPV is belt-tightening.”

      True. And then saving even more until you squeak.

      That is, unless you have the bravado and daring-do to run with the big dogs in the tall grass, i.e, play the casino (markets) at this late stage.

      • keppered says:

        At near negative rates and near zero interest rates for the last ten years who the hell in their right mind is still playing the saving game?

        • NBay says:

          Me, for one.

          But last decent paying bonds are maturing, so it just goes into the bank and shrinks. Not sure how much more downsizing I can do, but always thinking/planning for it.

    • Implicit says:

      … not stupid if you recognized it, and acted accordingly ;>{)

    • Old School says:

      Me too brother. In a Zirp environment every $1000 per month you can take out of your lifestyle is about $500,000 you don’t have to accumulate to live off of. I think when I did the numbers 15 years ago cutting lifestyle $1000 per month was about $250,000 you didn’t need to save. It’s a lot quicker to the goal line to cut than it is to accumulate.

      • 91B20 1stCav (AUS) says:

        Old-great observation! Reduction of laps on the hamster-wheel reduces the need for caloric intake-physical and financial (note i am NOT saying this can be taken to ‘reducto ad absurdium’…).

        may we all find a better day.

    • Happy1 says:

      Very wise.

    • cb says:

      A whole lot of rentier rental property owners have made real returns by simply refinancing. Dramatically increased cash flow on the same asset/debt base, just a lower interest rate.

      What suppresses the saver helps the debtor.

  9. Wisdom Seeker says:

    Interestingly, the consumer price index doesn’t include the “cost of retirement”, but you can actually price that out.

    If you want your own pension, the insurance companies will sell you an annuity which pays you income for the rest of your life. Then you die broke.

    Price of such an annuity depends on your age and exactly which options you pick, but a vanilla “lifetime” annuity starting at age 60 will cost you 20x the annual income you want to buy. If you include spouse’ lifetime too, or an inflation adjustment, those cost more.

    Surprisingly, in 2007 the cost of an annuity was only 14x the desired income.

    So as interest rates fall and markets soar (thus reducing _future_ returns), those who want to retire have to save 50% more to get the same retirement income (and more like 80% more to cover inflation too).

    The Fed’s obsession with consumer prices has blinded them to the massive standard of living destruction wrought by asset price inflation.

    Much as people can’t afford overpriced houses, they also can’t afford a retirement that costs 50% more than it used to, or 80% including inflation.

    • Beardawg says:

      WISDOM SEEKER

      This is a sobering observation. Many Wolf Streeters are in that age category. I took the cashout on a small / medium sized pension about 7 years ago because I sensed the “annuity” option (monthly pymt for life) would not keep up with inflation as calculated by the govt….AND….I would leave nothing to my heirs. So far, I guessed right. More than doubled the cashout principal (so far) and am receiving passive income which is more than what the annuity would have been.

      By all measures, I should be ecstatic….but the scary part is…..what’s next ??

      • keppered says:

        Are you. Sitting down?

      • Millie Brown says:

        Limited savings withdrawal (2010-present), limited stock purchases (Jan. 2021), limited credit/debit card transactions (Feb. 2021), limited app purchases (Mar. 2021), communication cost doubles for Americans (Apr. 1 2021), April 18th the internet goes out and only credit worthy Americans can get reconnected.

        • Calendra says:

          “limited credit/debit card transactions (Feb. 2021)” that and the roaring ahead inflation in real things means that smart people will use their cards to buy everything they will need for many years ahead, like TODAY.

          Monday is February, who knows what surprise announcements take affect then.

          Besides, items may not be available, at any price soon. U.S. defense establishment is proposing a new generation fighter to distract from the flying turkey F-35.
          How about building a mask plant first?
          Some national health care?
          Infrastructure?

    • Jk says:

      I think it’s best you work till you drop. Even if part time. Nothing wrong with that since it’s all about survival in the end. Our politicians going back many years have created a system full of obstacles for American citizens to live a good life in their older years. I read an article recently and I agree with this writer. He said the Chinese are trying to build their Middle Class and the American govt. is trying to destory theirs.

      • Implicit says:

        True that. Give you a good reason to get up in the morning when your bones are aching from injury and age.
        Plus, if you get SS ben., they keep growing.

      • Grammar Nazi says:

        do you have a link to the article? seems like an interesting read….

      • Happy1 says:

        China is working to change their very generous retirement pension program so that it is much less generous. They are careful because it is a 3rd rail and will likely destroy the communist party if done poorly.

    • keppered says:

      You caught that to?
      The consumer price index doesn’t include the “cost of retirement”, but you can actually price that out.
      Priceless…retirement?….

    • keppered says:

      As interest rates fall …. negative zero? A future retiree will need to double the egress to what is clearly a loss or surly soon to be a loss.
      Simply sounds like a losing proposal as far as even for a robinhooder (sp).
      In less somebody has a quick solution like two days ago GameStop thief’s …there ain’t no retirement at zero interest rates.
      Now it’s been discussed here at great length and the wolfs knowledge be supreme…
      The interest rates ain’t gonna go up or down.
      These clowns are stuck and the middle class just got …..

      • Wisdom Seeker says:

        You can’t live forever (yet?), so you CAN retire with rates at or below zero, and inflation above zero, as long as the gap between isn’t too big, and you don’t expect to live too long. Instead of 20x income you’d need 30 or 40. The insurers selling annuities will price it all out for you…

        Mathematically, there would come a point where rates get too low and inflation too high, and a lifetime annuity would have nearly infinite cost.

        • Lisa_Hooker says:

          Yup. Try finding someone to write an inflation-protected annuity.

        • keppered says:

          Maybe true but I had to take a few swigs off the old Brandy to digest this.
          It all makes sense now.. what am I living for?

    • Jeff says:

      You say that the Fed is “blinded to the standard of living destruction”. Do you really believe that they’re not aware of it? I’d wager that they’re aware of it, but don’t care since it’s not an issue for the elites whose interests the Fed serves.

      • Anthony A. says:

        Jeff, elites at those levels have underlings that are trained to not deliver bad news so as to not upset said elite. It’s always been like that……

    • polecat says:

      What it really is, is the CONSUMED & PUNKED Index – a 3-fingered governiod salute to peons across the Realm ….

      All Cost, No Gain!

    • cb says:

      The FEDs only obsession is to benefit it’s constituency, and that is not most of us here. We are the payor’s.

    • Lisa_Hooker says:

      @WS – Since 1998 I have always felt that the price of equities should be included in the CPI. We are continuously told that we need to invest savings in the stock markets for our retirement. I’ve never bothered to calculate, but I wonder what the CPI would be if it included the recommended 10% “spent” on the S&P 500 every year.

  10. Apple says:

    The economy is extremely fragile. I’m not sure it can handle another disruption.

    • Hernando says:

      How broke is everybody really? How stretched are they? If the top has all the money and is not stretched but the bottom and the middle class are stretched… What happens?

      This SPACs thing. Is it the 2021 version of credit default swaps? Is Robinhood the 2021 version of Ninja Loans and Adjustable Rate Mortgages? And forbearance and eviction moratoriums… that is like after the 2007 real estate market crash when people were looking for loan modifications… but now it is before the real estate market crash of 2021… it reminds me of a Tupac song about a woman that shows up in all of his buddies videos….

      • Heinz says:

        Indeed, I would like to see a complete reveal of how actually well off (or not) people are broken down by income bracket.

        Middle class, or what remains of it, seems to be holding on to American Dream (big house, vacations, expensive cars, etc) by the skin of their teeth and lots of debt.

        Occasionally ‘surveys’ pop up about how the average American doesn’t have enough cash availabe for a $500 (or whatever) ’emergency’. Umm, very interesting.

        As the hackneyed saying goes (I think from Uncle Warren), when the tide goes out we can finally see who has been swimming naked.

        • Hernando says:

          I was just listening to the real estate show I like and it reported that in December there were 1.07 million units 16.4% down from November down 23% from one year ago 1.39 million units.

          I’m middle class or low class… or something. I need to move; I’d like to buy, but I don’t want to pay too much because of a temporary cut in inventory. I can buy at an inflated price or rent at an inflated price… while others pay no rent and come spend it at the local hotels on the beach. I have enough money to buy a heck of a nice house – 4 months ago. Today, similar houses are running at about 10-20% more.

          And people are still diving in to the empty shelves of this government induced rationing of houses- like oranges and bread shelves in a USSR supermarket-

          Joey Biden, tear down this wall.

      • p coyle says:

        we will find out this week if robinhood is the 2021 version of LTCM or lehman. but it being 2021 and all, i have a feeling the fed will print the culpable insiders to further prosperity while some internet yahoos get to pay the price by getting martha stewart-ed.

        • NBay says:

          Yeah, saw SEC is looking at “market manipulation” charges.

          So is buying back stock, or was.

          Guess it’s all about one’s connections, and “Justice” being just another commodity, sold to the highest bidder.

        • polecat says:

          pfssst …. hey bud, gotta hot tip – the watch word of the daze is now
          …. s☆i☆l☆v☆e☆r ….

          ‘;]

      • Old School says:

        I read 50% of Americans don’t have three months savings.

    • Wisdom Seeker says:

      The economy isn’t fragile at all. It survived both the virus and the related shutdowns with only minimal damage. Historically the nation, and the world, have been through far greater disruptions too.

      The issue isn’t fragility or lack of output, it’s maldistribution.

      • Pituitary Gland says:

        Wisdom, eh?

        How many “T-T-Trillions” in stimulus $$$ does it take to keep this carnival tent standing through the storm? Not fragile at all, huh…

        There is only the illusion of temporary prosperity. Peel back another layer…

        …not enough substantial heart wood left to prop this shit show up for much longer.

        • Stephen C. says:

          Wisdom and Pituitary, are you two speaking at cross purposes? Economy vs. stock market?

  11. Jagor says:

    “Income hits,” not “Income hit.” “Income” is a singular noun and the verb should also be singular. Sorry. I taught English as a Second Language for many years in France and elsewhere. You’re not the only person who makes this mistake of using plural verbs for singular subjects. I see examples of it every day.

    • Wolf Richter says:

      Jagor,

      Sheesh, have you ever heard of “past tense?” As in something that happened in December? Do you know what the past tense of “hit” is? And of “cut?” The headline is in past tense, if you know what that is. “Hit” and “cut” are irregular verbs, of which there are not many in English, unlike in French. But I do recommend you study them.

      • Sit23 says:

        Jagor is right. Hit or hits is referring to income and should be singular. Incomes hit. Income hits. Your financial and economic stuff is brilliant though. (Or is it are brilliant though?)

        • Clete says:

          @Sit23: It’s “is” brilliant — “stuff” is the object, so the verb is singular.

          Took a lot of English classes because that was where the girls were.

        • Wolf Richter says:

          Sit23,

          Nope. It’s past tense. Read the headline. Past tense of hit = hit. Past tense of cut = cut. Singular or plural. They are irregular verbs. Basic English grammar that you should know.

        • Wisdom Seeker says:

          Try “hit” as verb in the first sentence and you can understand Wolf’s usage in the title:

          “Income … in December hit a new record”

          Or to simplify:

          “Wolf hit a ball”

        • Lisa_Hooker says:

          The base (or infinitive form): hit.
          The past tense: hit.
          The past participle: hit.

      • c_heale says:

        As a teacher of English as a second language for many years in Spain and Korea, it is obvious the headline is in the past tense since it refers to past events. I agree with Wolf.

    • Jeff says:

      Wolf is always going to get a pass from me on these grammar issues. I am continually amazed at the output, particularly when one considers the amount of data and lack of added political fodder within.

      I understand that you’re trying to be helpful, but understand that the rest of the world uses a phrase, “grammar nazi” to describe people that engage in these kinds of comments.

      • Anthony A. says:

        Jeff, how true, the content is great. I can do with a grammar thing or two.

        At my age, my spelling is getting fuzzy and I used to write big technical reports read by lawyers. But, I can still write in cursive, a method of communicating thoughts, which my 14 year old grandson can’t decipher (not the message, the cursive).

        • Wisdom Seeker says:

          Kids today think cursive is a way of communicating curses!

        • Lisa_Hooker says:

          They only teach kids how to print letters these days, and none to successfully. I started keeping annual journals about ten years ago and one of the major reasons was to write in cursive with a fountain pen. The skill comes back with practice.

      • Stephen C. says:

        Grammarians destroyed the once flourishing international Latin language, and if given heed today they will ossify and kill English. Much to the chagrin of credentialed teachers, people learn language from their mothers and a second language from their sex/marriage partners, or they just dive into the challenge of adjusting to a new culture after emigration. We don’t need no stinkin’ teachers! On a more serious note, the study of grammar was in ancient times understood as a philosophical journey of high order. It’s unfortunate that is has been used ever since as a torture-lite for the lower orders. And yeah, I get it, about the need to learn a certain style for college and professional life, but that’s not a good enough reason to embrace the Nazi within.

        • 91B20 1stCav (AUS) says:

          Steph C.- not a day goes by that i’m grateful to have grown up as a native English speaker, with its myriad conundrums/oxymorons. Huge admiration for anyone who has made it their second language, and who often practice it at a more-proficient level than the ‘natives’ (lookin’ at YOU, Wolf!).

          may we all find a better day.

        • Stephen C. says:

          I could lie and say that I threw in grammatical errors just to mess with y’all, but honestly they were typos stemming from being in a hurry. I’m not retired so I tend to rush. I apologize to this fine crowd.

    • cb says:

      @ Jagor –

      Not that I give a rat’s rear-end about the technicalities of English, but can’t singular income suffer multiple hits?

      • Lisa_Hooker says:

        Or, it could be hit multiple times.

        To all those that do not own a copy of “The Elements of Style,” Buy one, it’s cheap. It’s very short. Read it. Re-read it. A nice thing to do for the English language.

      • NBay says:

        It doesn’t take much effort to get the gist of someone’s comments, and that’s what counts. As a fluent speaker of the coastal logger redneck tribe dialect, I drop back into it easily around friends.

        It don’t make no difference here either.

  12. Keppered says:

    as consumers had spent a portion of the Pandemic money on laptops, smartphones, appliances, new vehicles, or rowing machines – I just learned that the models by the most established brand are still on backorder. Many of these products or their components are imported, leading to a……..

    Oh please..

    Kinda like the Shrubs 300 dollar barf give away. Gee… I think I’ll spend it on my self for a new washer and dryer?
    So concurrently yes nothing gained nothing was realistic helpful.
    It’s to little stupidity to small amount to late and is a complete slap in the face.
    Let s consider stopping the repeated corporate giveaways in the tune of hundreds of billions dollars (god knows what the perverts do with the money the use to buy back defeat stocks)?
    And stop the horridly year after year crime this half republic has suffered on the federal government/corporate since the thieves of the early eighties sold us down the river.
    Just sayin,
    -k

    • Hernando says:

      You know, if a person steals money and give a person 10 bucks to buy some ice cream and chocolates they won’t care when the thief gives 20,000 dollars to his governor friend who buys a nice dinner for his family in Napa and keeps his own business afloat… during COVID… when all his competitors are bankrupt…. or something.

      • Winston says:

        Yep, this country has been a banana republic for a long time, it’s just that it’s so wealthy that the skim isn’t noticed as much by the average prole and the graft is transferred in far less obvious and legal fashions.

        • RightNYer says:

          That’s the big myth. We’re not wealthy at all. By all calculations, we are insolvent. We’re just riding the coattails of when we were wealthy in the past. We’re like the guy with the big credit card limit whose bank hasn’t yet realized that he lost his job.

        • Lisa_Hooker says:

          Mr Right – that’s one of the best analogies I’ve heard yet.

        • VintageVNvet says:

          Good one rnyr!
          Knew a guy couple decades ago who claimed he did that for almost 2 years before he ran out of credit on his card and went the BK way.
          Said he just took out some cash once a month and made the minimum payment or a little bit more each time, and I suppose that was all it took to calm the computer watching until he finally failed to pay.
          Did also have some cash from selling previously acquired fancy ”stuff” for a dime on the dollar, and had bought a live on sail boat for cash at the beginning, so just moved slowly around FL, on the hook, until getting pushed out by the local authorities, etc…
          Only hitch in the giddy up was he got bored with the whole situation, went back to work for the entertainment of it???

        • Winston says:

          “We’re not wealthy at all. By all calculations, we are insolvent.”

          Give me a break… Insolvent NOW, not in the prosperous, post-WWII past when our competition worldwide was destroyed and we were a major brain-drain from the rest of the world’s rubble.

          Now, we are only “wealthy” in the debt-based, fiat monetary aspect and via the two-steps forward, one step back bubble/bust transfer of REAL assets at fire-sale prices to the 0.1%, the skim is taking place.

  13. AbstractSyntax says:

    Buckle up. Another 2.8 trillion $$$ is on its way (900M +1.9T proposed).

    I’m not sure why it isn’t even higher. When none of this money is being collected via taxation, what’s the difference between printing 5T, 10T, or 20T? And after you tell the public they’ll get (some of) it… talk of consequences just vanishes.

    • keppered says:

      That’s the guises of the the problem of the the orchestrated thief of the middle class. The lenders to this thievery won’t stop until they are the owners of every last breath we pleps goy out in anguishing dumbfounding stupidity.
      Just sayin!

    • RightNYer says:

      The thing is, all of this is doing is hastening the “reset.” The fact that the dollar has dropped 10% against foreign currencies at a time when the foreign central banks are being similarly reckless shows that we are NOT the “cleanest dirty shirt” as proponents of MMT like to say.

      If we keep printing trillions, which is basically a way of trying to get foreigners to subsidize our lifestyle, eventually, we will have a crash that will lead to EVERYONE becoming poorer, from the top all the way down to the bottom.

      • cb says:

        RightNYer: “If we keep printing trillions, which is basically a way of trying to get foreigners to subsidize our lifestyle”
        _____________________________________________

        It’s a way to steal from existing savers, foreign or domestic, of dollars.

      • NBay says:

        A low tide grounds ALL boats? Don’t bet on it. The rising tide analogy didn’t work as advertised.

    • You have heard of sales tax? More to the point with this next check I might be able to afford to hire somebody to help me around the place. So it’s not just the CCP who is getting rich off this.

  14. Dano says:

    There’s a remarkable podcast of The Grant Williams show on Podbean (and probably others) where he and Bill Fleckenstein (former money manager for Paul Allen) interview Chris Cole of Artemis Capital. I think it’s only 2 months old or so.

    Chris (IMHO) is a genius when it comes to volatility. The entire discussion is eye opening, even if many parts will be over many peoples heads.

    The most important decision anyone will make for retirement in their future will be getting deflation/inflation correct, and when.

    Someone above noted your option (and rising costs) of buying an annuity. I’ve never forgotten a show with Jim Puplava on Financial Sense Newshour (podcast) where he discussed the ravages of what inflation did to a bond investor who went “all in” in the 60’s, only to emerge with less than half the purchasing power in the 70’s.

    Investors suffer from incredible “recency bias” of (supposed) deflation over the past few decades. I would not bank on that same scenario in the future.

    I encourage all to listen to Chris Cole. Well worth your time. Personally I expect the future to look absolutely nothing like our past 40 years.

    • Hernando says:

      Chris Cole is interesting; I liked Jeremy Gratham’s recent interview with Bloomberg… but I also like the kwak brothers- such an interesting way of looking at real estate.

    • Joe Blow says:

      You couldnt conceive all the fraud that illegals engage in ,fake ssi #s, tax fraud etc. I know an illegal Honduran that bought a house under an assumed name.

      • Franklin says:

        2/26/2017
        California State Senator Kevin de Leon said: “Half of my family would be eligible for deportation under Trump’s executive order, because they got a false social security card, they got a false identification, they got a false driver’s license prior to us passing AB 60, they got a false green card, and anyone who has family members who are undocumented knows that almost entirely everybody has secured some sort of false identification.”

        So, when does Biden name him head of DHS?

      • Old School says:

        It really has affects on people’s lives. A lot of legitimate businesses were priced out of the market in residential construction by the gray market in illegal aliens. Politicians encouraging an illegal subculture was giving the finger to people playing by the rules of paying income taxes and providing workers comp.

    • Implicit says:

      I realize that we are getting inflation presently, but It is still up in the air if we will keep getting inflation for the rest of the year.
      There is still a good case for deflation due to the weak velocity of money related with unearned printed money. MacroView: 2021 – A Disappointment Of Growth And Disinflation. by Lance Roberts

      • Old School says:

        The smart people I read are not worried about protecting their portfolio from inflation at the present. They believe there are leading indictors that allow you too reposition. Hope they are right.

      • Happy1 says:

        Getting inflation presently? Open your eyes! We have had massive inflation post 2008, the average home price has roughly doubled, tuition and property taxes similar trajectory, food, healthcare, etc. The Fed says less than 2% because it deliberately measures an index that downplays all of this with imputed rent and hedonic adjustments that are pure snake oil.

    • Anthony A. says:

      Thanks for the reference for the podcast. I listened to it today. Quite startling and informative.

      • Dano says:

        The next one you should check out is Luke Gromen on MacroVoices podcast. Episode #254. Also on Podbean & others.

        Between those two you’ll really be thinking!

        For a chaser find the latest #256 on MacroVoices as well. I’d never bet against Russell Napier. Wicked smart economic historian.

        All the people worried here about illegals working are distracted from the big picture. They see the trees, not the forest awaiting a match by the Fed & Treasury. That match is coming my friend.

    • Winston says:

      I like the recent (22 Jan) YouTube video “Why Grantham Says the Next Crash Will Rival 1929, 2000”:

      “Jeremy Grantham, co-founder and chief investment strategist of Boston’s GMO, believes U.S. stocks have become an epic bubble and will burst in a collapse rivaling the crashes of 1929 and 2000. In this interview, he explains why, discusses the futility of Federal Reserve policy, criticizes the state of American capitalism, and shares his thoughts on gold, Bitcoin, emerging markets and climate change.”

    • Rumpled Bemused says:

      “The most important decision anyone will make for retirement in their future will be getting deflation/inflation correct, and when.”

      I’ve been reading arguments regarding deflation and inflation for the past several years, and there are good arguments for both. If these people who are far more educated and experienced than myself cannot agree, I have no hope of choosing correctly and getting the timing right aside from pure luck.

      I am as diversified as a man of my limited means can be, but in an everything bubble with manipulated markets there is no way to know which asset class or currency will collapse first and how, when or if the others will follow.

  15. FDR says:

    Wolf,

    Thx much for the info.

  16. Joe in LA says:

    The Fed released the Q4 Velocity of M1 Money Supply data today — down from Q3. This is a double-dip recession with mass unemployment and an ocean of cheap debt for speculators.

    The reflation stock trade is a pipe dream. Perhaps all this liquidity can keep the zombie casino jumping, but I still say deflation first, then inflation.

    • keppered says:

      Hello LA,
      They are bit behind the curve and playing a very slow game of hardball. It is as the owners of this monetary crime is at its last vestige (footsteps) , or what?
      I am betting these wrinkled old family players are down to shooting craps.
      But this is no clean hustle.
      The world casino stop enforcing the rules.
      -k

    • Implicit says:

      Yep. MacroView: 2021 – A Disappointment Of Growth And Disinflation. by Lance Roberts with some nice charts to support that thesis:

  17. Suppose food was free, by government decree.
    Immediately, you couldn’t buy it.

    Millions aren’t paying rent.

    What “geniuses” came up with such a “plan” ?!

    • Stephen C. says:

      The taxpayer, present and future, is paying that rent. Perhaps the majority of them just don’t realize it yet. As stated in a previous comment on a previous Wolf post, I have read on a Marin county official Covid-site that at least the State of California got billions to help landlords out, all in the CARES act. I haven’t heard much else about this in mainstream media. I would love to hear from the bevy of small landlords on this site, who’ve been somewhat silent lately, if this is true and if so, do they have to go through a lot of paperwork to get their bailout.

  18. Brant Lee says:

    I suppose births leveled out as well in 2020 as people are now horrified at the cost of raising more kids BUT working at home gave more time for woopy. The numbers evened out.

  19. timbers says:

    Inflation:

    I have an inflation stat I’m oh so very sure the Fed will catch in it’s CPI.

    Recently popped into the store to see if they had stocked up grass seed for coming spring as I contemplate spot seeding my front yard (did back yard last year). Guess what? Vigoro – generally the least costly bare bones seed and nothing but the seed – has now adopted the “coating” like other grass seed brands which means you’re only getting 50% as much seed because the coating takes up the other 50%.

    About same price range, though. For half the seed. They claim the coating improves performance of the seed.

    IMO the coating impedes germination based on my limited experience. I tried one without, and without, last year. The all seed and nothing but the seed seemed to work better. I found the coated seed to germinated more slowly, and less so.

    Quick guessitmate…100% inflation for grass seed this spring in my corner of PeasantryVille, USA.

    • polecat says:

      Turf if an overrated anachronism from the past. I’d rather have a viable food garden in front of my humble manor/castle, then a green …especially in these tumultuous times.
      I suppose you could plant Wheatgrass instead .. one can at least eat that.

      • timbers says:

        Agree. Am taking a bit different direction than yourself, planting shrubs and Oak trees (slow growth) and River Birch trees (moderate growth) and Japanese Maples and Magnolia trees along with creeping myrtle for ground cover. But will keep grass in shaded locations because it doesn’t require summer watering & chemicals to flourish when protected from dry summer heat by tree shade.

        • polecat says:

          Yeah, that sounds like a good strategy. Might consider some fruit/nut trees/shrubs (aside from those acorn producing oaks..) Doing double-duty as it were: ornamental AND edible to boot! That’s what I’ve tried to do, on our tiny speck of Terra.
          I just shake my head when I see homes with plunked-in ersatz foundation plantings and resource intensive (for All the wrong reasons..) lawns. Thujas and bermudagrass just don’t cut it in my book. Not trying to sound virtuous, but people Really need to wake-up to the possibilities of severe food shortages, and of ever greater food ingredient adulteration/crapification of whatever IS available ..where corporate intentions and gov. oversights are concerned.

      • NBay says:

        Wild oats grow all over hell here as a weed and are TOO easy to start fire in when dry. Cat converter can easily do it and often does, along with cig butt someone thought was out. See that along roadsides everywhere.
        Must have some kind of germ with nutritional value and a technique for harvesting it that can be worked out? It IS an oat.

        • NBay says:

          Actually “wild oats” are European import. Native bunch grass is rare and mostly under trees, now. Was no use to Indians except maybe for baskets. I know they figured out how to make acorns palatable, and it was a staple among Yokuts of Kern Co area.

    • Implicit says:

      Same story true of the soil additive vermiculite, The coated stuff adds 100% to the weight but you get 50% of the stuff that does the job retaining moisture.

  20. c1ue says:

    The real question is how many more votes for status quo vs pitchforks.
    10 to 16 million more unemployed, how many more underemployed/struggling to survive SMBs vs the 1% PMC?
    And what will they do?
    Maybe they’ll be mollified by stimulus payments.
    But maybe not.

    • Stephen C. says:

      If you believe what you read in the “papers” there was a record turnout in voters for the two-headed political beast, one of which, the winning head, promised no fundamental change. So I’m thinking we’re a long way from the pitchfork and guillotine scenario.

      Indeed, after the Occupy Wall Street peeps were so effectively wiped from view, and the pied piper Trump corralled dissent into its worst possible light, I’m thinking the Powers That Be have a tight grip on things.

      Alternatively, they might think they have firm control, and from that mistaken viewpoint, recently made and will continue to make colossal miscalculations.

      Only time will tell.

      • Joe in LA says:

        Systems can collapse very quickly. Remember how fast we went from the endless Cold War to the collapse of the Soviet Union? The USSR vanished almost overnight.

        The oligarchy in America is strangling 90% of the people economically. Maybe this goes on for a little longer, but it also might unravel suddenly.

        • Ellie says:

          Joe,
          Agreed. This lesson I learned early in life. I lived in East Germany in November of 89. It took only a few months from the movement gaining momentum to the fall.

          So, with all the recent events I’m on pins and needles…and somehow I am excited about the future as well.

  21. Heinz says:

    Based on this article, we can safely conclude that year 2020 was a tale of two cities– Happyville (its residents are better off than ever under the Pandemic) and Sadville (its people lost jobs and are more financially insecure than ever).

    Wolfstreet chart on Personal Income (wages & salaries) growth (from BLS stats) is amazing. In the aggregate it shows US has recovered from COVID hit and is chugging forward on jobs and incomes. Of course, if you look under the hood it is not the whole story, as Wolf correctly points out.

    I would love to see this income growth displayed in income quintile averages. I think this would reveal the truth about who got the chocolate chip cookies this year and who got nasty mud cakes.

    • Road to Serfdom says:

      Happyville: inhabited by government employees who didn’t go to work, got paid, and even got raises. Also were exempt from government restrictions thereby able to visit salons and take vacations in Hawaii.

  22. DR DOOM says:

    This post ( hedonic adjusted) would have applied to feudalistic Europe or a sovereign and their court . The masses can take comfort that their betters are amply compensated.

    • NBay says:

      And the good Calvinists do….mysterious ways and all that stuff…..their own government, however, seems to be fair blame game material.

  23. Helmut Beintner says:

    We are in the starting pint of another GREAT DEPRESSION. Covic is not the cause, just an accelerator. The rot in al the different systems have been building up in the world for a long time.

    • cd says:

      yep, but now, the big key part of this road to serfdom is that the rich are hedged now much differently than 09-10…12 years of ungodly growth in wealth, they are now ready for what lies ahead…..

      the poor, not so much..the middle class, whats left of it, laid for bare….

  24. Martha Careful says:

    After fully reading the nice Wolf post, I thought of this:

    “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

    Then, in slightly related thoughts about future growth and GDP, thought about the Dollar crybabies and various inflation crybabies and searched for something to pacify and coddle those who fearful:

    Taming the Currency Hype

    IMF blog (AUGUST 21, 2019)

    Exchange rates can’t do it all
    Monetary easing can help stimulate domestic demand, which in turn benefits other countries by increasing demand for their goods. The concern, however, is that monetary easing also weakens a country’s exchange rate, making exports more competitive and reducing demand for other countries’ imports as they become more expensive—a phenomenon known as expenditure switching. With conventional monetary space limited for some advanced economies, this currency channel of monetary easing has received considerable attention. But one should not put too much stock in the view that easing monetary policy can weaken a country’s currency enough to bring a lasting improvement in its trade balance through expenditure switching. Monetary policy alone is unlikely to induce the large and persistent devaluations that are needed to bring that result.
    As we estimated in our 2019 External Sector Report , the expenditure switching effects of a currency weakening are generally small, especially within a 12-month period. A 10 percent depreciation (vis-à-vis all currencies) improves a country’s trade balance by about 0.3 percent of GDP in the near term, on average, with most of the effects coming through a contraction of imports. In part, this reflects the fact that trade is largely invoiced in dollars, which means that for most countries export volumes tend to respond little to exchange rates in the short run. This applies to key US trading partners, where the bulk of exports to and from the United States are invoiced in dollars. It is worth noting that in the case of the United States, the muted impact on the trade balance reflects a weak response of imports.

  25. SocalJim says:

    Many Americans continue to spend because of equity market gains. That may not last. As I have been saying for the last few weeks, we are in for a rough patch. If your portfolio needs routine financing trades, you should raise your cash levels now.

    Every money manager was positioned exactly the same way. The new administration took office 10 days ago and signed a many EOs that restored a bunch of operation margin killing and job killing regulations. Now, holdings needs to change because forward earnings will be reduced and redistributed among sectors and styles. Market makers, who typically have a hedge fund behind their activies are suffering from all of the rebalancing so liquidity is scarce. Hedge fund managers are sitting on the titanic.

    Many want to pretend WallStreetBets is the problem. That is a wish … as if WallStreetBets was shut down, the market would return to normal. WallStreetBets is just along for the ride. They are not the cause.

    The cause is the policies of the new administration. The new administration will claim those policies are the right way forward and push for massive money printing to make things right. This increases the risk of stagflation and financial instability which triggered a rush for hard assets. This will be fun to watch.

    • MonkeyBusiness says:

      WallStreetBets is nothing. Blaming the new admin however is a reach. It’s like saying, this country is so fragile, one or two brand new policies would bring the whole edifice down. Then who made the country so fragile in the first place?

      • SocalJim says:

        MonkeyBusiness, because of cost reductions over the last decade, the typical operating margin leverage is increasing and very high. So, stock valuations are very sensitive to operating margin changes …. Equity 101. In this case, operating margin reductions from sudden and sweeping regulations changes is having a substantial impact to valuations, as it should.

        • nodecentrepublicansleft says:

          So let’s hear the specifics!

          Please tell me how the administration that took over 10 days is responsible for all our woes!!

          The very idea is ridiculous…..

    • timbers says:

      “The cause is the policies of the new administration. The new administration will…push for massive money printing to make things right.”

      How are these new money printing polices different from the old money printing polices of the prior Admin(s)? Did they change the faces on the bills being printed?

      Remind me again how long the current Admin (practically the same as the previous 12 years Admins) has been in office, and it’s already responsible for the chaos? Not that I’m defending them. But when you have 4 Admins that follow essentially the same policies on all the big issues, why load 40 years of blame into just a few days? There are so many more possibilities.

      • SocalJim says:

        Figure it out … good long positions are going down because of operating margin compression from regulations all dropped in the last 10 days. No one on wall street thought they would be dumb enough to do something like this … but it happened so the good longs are being reduced.

        At the same time, all the good shorts are now jumping because of a promise of lots of new money from central banks giving them a new lease on life … classic dash for trash.

        This is classic stupidity. You don’t throw massive regulations on while you promise printed money or you get this.

        Wall street is worried that everyone will figure this out and run for the exits, so the evil WallStreetBets is a nice way to cover it all up. Plus, wall street dare not smear the new administration with their regulation stupidity or the SEC and FINRA will be filing some kind of charges because most wall street firms have some kind of dirt.

        I expect some secret loans are given out to people in trouble on the same day WallStreetBets and/or Robinhood is shut down to keep you looking the other way.

        • timbers says:

          “long positions are going down because of operating margin compression from regulations all dropped in the last 10 days…”

          What operating costs? The adding of zeros in the Fed QE programs?

          “shorts are now jumping because of a promise of lots of new money from central banks giving them a new lease on life”

          Since when did market whims of the micro-second become definitive policy critiques? Which new money are you referring to? You have dozens of events these past 40 or so years of money printing to choose from, and at least 15 years of calling it QE and “going big” doing it.

          Why – after 40 some years of following essentially the same core polices – have these very same polices become bad only these last 10 days? Name one major difference in core economic policy amongst Admin these past 40 yrs.

        • MonkeyBusiness says:

          @timbers, I had a good laugh reading that drivel. It’s like a druggie complaining that his supply has been cut off. There’s no self awareness whatsoever that the problem might be that one should not be a druggie in the first place.

          ROFL.

        • cb says:

          SocalJim said: “good long positions are going down because of operating margin compression from regulations all dropped in the last 10 days.”
          ________________________________

          What are the specific regulations that you are referring to?

        • timbers says:

          cb,

          When someone goes into the Fed’s computer to add a zero or digit to it’s QE program, they might someday have pay that person $15.00/hr minimum.

          So if it takes 1/4 hour to perform this task, that’s $3.75 of added marginal cost to the financial markets, will cause a compression of margin that could trigger the next Great Depression.

          Remember, the economy is very fragile for our elites and job creators.

    • Implicit says:

      Well said! Indeed, the spending will not last.
      Unearned money has no long distance legs, and no M1 velocity.

    • Wolf Richter says:

      SoaclJim,

      “The cause is the policies of the new administration.”

      Hahahahahaha, the new administration has been in office for 9 days and you’re already blaming them for the market turmoil (and Trump’s legacy). You’re a genius.

      The insanity in this market has been going on since May/June for all to see. The signs were everywhere. Everyone knew that this insanity would eventually blow up the market –it always does — but everyone wanted to ride the insanity to the last day.

      Or did you lose some money recently, after having been blindly bullish for years, and after having bragged here for years that you’re blindly bullish, and now you’re hurting and you’re looking for someone else to blame your blind bullishness on? And sure enough, you found a neato way to come up with a hilarious political distortion. I mean, I just love this.

      Looks like we’re going to get more of this. But you were #1, you set the record here with just 9 days! Congratulations!

      • SocalJim says:

        Market valuations are forward looking … 100% forward looking. The regulation changes are the main culprit because when they go on, the market reprices down.

        No one expected all those regulations would get slapped on that quick.

        When the last president stripped the regulations away over the years, the market rallied hard. That was the magic dust … and it is being taken away all at once. This is basic stuff that we should not be debating. I am sure analysts are calculating the impact of the regulations going on as we type.

        • Bart says:

          Wisdom,

          The economy is fragile and becoming more so due to greater debt levels carried by our government. Household have to use debt increasingly because wages have not kept up with inflation. With the next downturn, we have a government more leveraged than ever so less tools to cope with at least another $1B in debt coming.

          Jim,

          Stripping regulations was the magic dust.

          Why then did corp America load up their balance sheets with debt to do buybacks? Actual earnings for a lot of these companies has been stagnant. Execs making a fortune and their primary strategy is buybacks? How many zombie cos out there that have seen SP do well the last few years? Alchemy.

          11 days into a new administration is not enough time nor enough changes to have adverse outcomes.

        • SocalJim says:

          When the market witnessed the new administration slapping on such drastic regulations, the market downgraded our economic future. 9 days of non-stop regulations hoisted on the back off the economy does matter. For example, the climate accord and the oil pipeline regulations are an economic earthquake … and they are just the start. The market is expecting more of this. The last administration made the market performance a top priority. This administration puts social and climate policy ahead of the market.

        • NBay says:

          How does one do “magic dust”? Straw, pipe, bowl, or just geeze it?

        • cas127 says:

          SJ,

          You are leaning *wayyyy* too hard on single issue cause-and-effect.

          I know the “regulatory burden” argument has some (longer term) basis in reality and it is definitely a heavily pounded political talking point…but in reality it isn’t going to have monumental, instantaneous effects…unless the regulatory changes are monumental and instantaneous too.

          Trump didn’t make enough (any?) massive regulatory changes so that unwinding them is tantamount to an unforeseeable, unadaptable cataclysm of change.

          Trump ran his mouth a monumental amount but accomplished closer to a mouse’s worth of actual change in the ruinous arc of US gvt.

      • SocalJim says:

        FYI … the $15.00 minimum wage thingy is another SP500 killer. Don’t you agree? Talk about damage to operating margins flowing into valuations.

        • timbers says:

          That’s $15.00 by 2025.

          Jim, what would you say inflation is running at?

          Now, take that and add in the extra inflation from all that extra money printing you see in the new Admin. What figure do you get to now?

          Now, take that inflation and times that 4 or 5 from average wages, for 2025.

          Maybe you should pop open some champagne and celebrate, because if it’s only going to $15.00 the S&P just might roar with approval at declining wages vs cost of living due to all the extra money printing from the new Admin.

        • Wolf Richter says:

          SocalJim,

          States and cities have long had living wages that are higher than the federal minimum wage. In many places, it’s already over $15 or will be soon. It didn’t kill the SP500.

          By the time the Federal $15 is phased in over the next few years, living wages in those places will be $20.

          Besides, higher wages make better consumers and higher revenues for companies. Gotta look at the bright side :-]

        • Swamp Creature says:

          The $15 min wage is stupid. Min wage should be applied on a state by state basis, or even country by county based on the cost of living. NYC should have a much higher min wage than say rural Arkansas. The executive orders passed by this new administration are moronic to say the least.

          I think it is fair to say that 9 days into this administration I’ve already lost any confidence that they have the slightest idea what the hell they are doing, or the consequenses of their backward policies. I wonder what will happen to the stock market if the 75 million people who didn’t vote for these clowns and see what I see suddenly hit the sell button.

          If you want to hear brain dead morons, turn on CNBC in the morning and listen to these Wall Street shills peddle their bulls$it non-stop. I almost wanted to puke the other day.

        • Harvey says:

          It is amazing to me that right-wingers continue to argue against a higher minimum wage (or having any minimum wage at all) when 1.) Zero increases in the minimum wage have ever been reversed or lowered and 2.) Working people are forced to take government benefits – meaning the public is effectively subsidizing their wages for the sake of private companies.

        • NBay says:

          If you really want to hear them scream, bring up returning to Eisenhower (the “maga” years) or even JFK income tax schedules…..and estate taxes from the same eras will send them through the roof! Even if adjusted for inflation.

        • 91B20 1stCav (AUS) says:

          NBay-be very careful repeating that one, you could wind up covered in the remains of an exploding head…

          may we all find a better day.

      • Swamp Creature says:

        The new administration got 9 days, which in today’s environment is a long honeymoon period. As I recall President Trump didn’t get 1 hour before they started going after him.

        • Swamp Creature says:

          I think one day after his Inauguration Madonna wanted to blow up the White House. That was the shortest honeymoon on record.

        • Wolf Richter says:

          Biden didn’t get one hour either. It’s just on this site, which is non-political in theory and everyone is biting their tongue, that it took 9 days. This is not a universal 9 days, it’s a WOLF STREET 9 days :-]

        • VintageVNvet says:

          Love it Wolf, and hope you have received the MO??
          Going to have to agree, like totally, with the dude or dudette who just nominated you for SecTreas!!!

        • Stephen C. says:

          Correct me if I’m wrong, but operation Crossfire Hurricane began even before Trump got into office. There is a recent news item out there about the FBI agent who doctored an email to justify a part of the investigation, was convicted and as punishment got a whopping 1,000 hours community service.

      • The Nominalist says:

        The “new administration” with Biden and Yellen etc. is the old administration – e.g. returning to Paris Accord.

        Anyway, old or new administrations are irrelevant since the puppetieers are the same.

        • Winston says:

          Yep, here’s my political statement – they’re ALL lying scum and if you think any of them are actually working for YOU, you’re a fool to put it politely.

        • Swamp Creature says:

          Winston hit the mail on the head!

          One exception. I like Rand Paul and his old man Ron.

  26. Nathan Redshield says:

    So someone finally caught on to this! My UnEmp Comp with Fed boost (no, I’m one of those who hasn’t gotten a stimulus check–long story involving avoiding amending taxes year after year you don’t want to hear) pays me 50% more than my part-time work did in the previous year. Employer (state!) furloughed me but I now pay reduced insurance permiums. In short more money than ever with expenses reduced! One more year of “work” for maximum SS (long story I told you you didn’t want to hear!). Of course there are those like the waiter at my favotie sports bar last month on Lockdown Eve who had only 3 weeks’ savings! I didn’t have to heart to tell him I had cash positions I could live on for eight years–but I would be soon doing a “Mr. Potter” buying everything in sight (DUK, F, GLW, XOM, OXY, FITB, WFC etc.) while it was down. Cash position cut in half within weeks with depositing of checks so delayed I had to do my buying by margin loans. But again I understand the travails of those who aren’t asset-rich and income-poor like me–too many people of all classes don’t think of those unfortunates who were income-rich and asset-poor before Wuhan hit. This is why stimulus should only be given as added unemployment–retired people on SS don’t need it–they haven’t missed a cent. As for the shrieks of the bear tribe, go out and buy GME on its “dips” then sell it back a day later on its “peaks” and silence their yowls for a few minutes–short squeezing in reverse. Of course when GME does its final collapse if you don’t time this right you may have some expensive wallpaper. Some words or thoughts on the legendary Northern Pacific Corner of 1902 might prove interesting–same effect as in this GME Squeeze!

    • Nathan Redshield says:

      Sorry, that bit in the bar was in March 2020 when I went bottom-fishing.

    • Clete says:

      “asset-rich and income-poor” is not a terrible place to be when the new tax code kicks in for 2021 and beyond. (Assuming they don’t just confiscate the assets.)

      • Swamp Creature says:

        In 2021 and beyond the only income that really matters is going to be “Southern Income” . For you readers in flyover country that’s a NYC term for income off the books. When I was growing up there people would openly brag about making money and not paying a dime in City, State, or Federal taxes. It was considered a badge of honor.

        One dude I remember, moved to Fla and got a tax bill from NY, for partial residential status. He was attending a party in the clubhouse and in front of 30 people got the mike and announced that he was ripping up the tax bill right in front of them.

    • Implicit says:

      Well Hope you gave that waiter a nice cash tip, and told him it was a gift (up to 10g tax free)

      • Mary says:

        The ONLY reason not to pay cash for every service and item, is if you can write if off against your income.

        If you are not a business, or have too little business income to need a write off, make it a point to withdraw cash from the bank and spend it for all purchases and services. You should get a discount and will be providing more income to your fellow citizens at no extra cost to youreself.

    • Lisa_Hooker says:

      @Nate “–retired people on SS don’t need it–they haven’t missed a cent.” BS. With interest rates this low I figure the Feds cheated me out of a couple of hundred thousand dollars. Why? Because all of my 40+ year working life the rate never dropped below 3.25%. Perhaps when your income suddenly drops $2000/month in retirement you may feel differently.

  27. Eddy says:

    It does seem as if productivity is growing. Debt is fine if productivity grows, generally speaking, is it? WFH. And household debt and government debt are on the same side of the balance sheet. So private debt has been nationalised, much as it was after the GFC. That makes it cheape. I also read in The Economist we are heading in a good direction with the deficit. Of course there are losers (me, pensioning on savings) and winners (cozy to the source). But anyway, the challenge will be to absorb those workers into productive jobs. Big sectors are not seen as productive. Govt. does not even measure productivity but as you know our govt. is relatively small.

    • SocalJim says:

      Productivity was growing before all the new regulations were slapped on over the last 10 days.

      • GDP is on previous admin, not sure how productivity dived in 10 days or where you get those numbers. If the US had proper regulations on business the sendoff of capitalist China would have never happened in unregulated fashion. Forty years later US government has no leverage on China or the American companies who do business there, but let’s accept that as post colonial reality. Wage pressure is the key to growth and inflation but it’s hard to see that happening as long as the old offshoring connections are still in place.

        • Eddy says:

          I think you are dragging in populist ideas. Blame it on the govt. or on foreign countries. It’s not to do much with productivity. I won’t talk about last century. We have to move on. See what is next. Little time is left for all of us. Be productive and you spend it well.

      • nodecentrepublicansleft says:

        With all due respect, perhaps you should quit while you’re ahead?

        Considering you’ve said the same non-nonsense 3 or 4 times.

        Some people just insist on humiliating themselves on the net.

        • SocalJim says:

          The problem is too many people let their political affiliation impact their investment decision. How could you think the Paris Climate Accord is will not impact operating margins?

          China and India get to run their factories with no changes from the climate rules. They can even add new factories that do not comply.

          In the meantime, US factories see their costs go up in many ways to comply with climate regulations.

          So, US firms see their costs of production go up. While that is happenning, their product pricing can not be raised because they have to compete with foreign competition who get to sidestep the climate regulations.

          This is margin compression brought to you by our new administration and it will flow to the bottom line.

          I understand many on this site have no professional experience, so this may not be implicit in your understand of the issue. It is not your fault, the media, including the clowns at CNBC, are sure doing a great job of hiding this.

          The new administration thinks they can just flood the US with fiscal and monetary policy to cover up this margin compression that will face US corporations … I think we are in for a rough ride. I have been bullish since March, now I am neutral to slightly bearish on US equity. If the market decides the corp tax rates are going up, then I am very bearish … I don’t think they are that dump.

          Amazing watching Dems deny any off this reality …

    • roddy6667 says:

      Debt is fine if productivity grows. True. Productivity runs hot and cold, boom or bust. Meanwhile, debt is unchanged. You have to make the payments when your income has dropped.

  28. LifeSupportSystem4aVote says:

    Wolf, in your “Income from other sources” section, you listed “Interest & Dividend income: -0.9% ($2.95 trillion)” which caught my eye due to it dropping less than 1% in a year that the Fed slammed interest rates to the floor. I immediately assumed (yeah, yeah, I know) that dividend income must have really increased to offset the loss of interest income and I wanted to see if I could find on Fred the two broken out individually to see how they bifurcated.

    I found what I thought were the two correct graphs: https://fred.stlouisfed.org/series/B069RC1 (interest) and https://fred.stlouisfed.org/series/PDI (dividends) but the total of the two, is only about half of the $2.95T shown. Interest of $261.9B and dividends of $1329.4B for a total of $1.591.3T Searching for the combined total on FRED, the only series I could find ended in 1966.

    I don’t know where I went wrong here, but can you provide the source(s) for your total 2.95T?

    Thank you in advance

    • Wolf Richter says:

      LifeSupportSystem4aVote,

      OK, let’s walk through this.

      Your first chart is the wrong chart, tracking a totally different thing: “interest PAYMENTS” — the amount consumers PAID in interest on their mortgages, credit cards, etc.

      And yes, interest payments dropped because rates have plunged and consumers have massively refinanced their mortgages to take advantage of the lower rates, and also because consumers have paid down their credit cards by a historic amount, thus saving on interest.

      But we’re talking about interest INCOME here – meaning interest earned.

      Your second chart on dividend income is correct and matches my numbers.

      To get to INCOME from interest and dividends, go to the original BEA report, page 7 lines 19 and 20. The December value is in the right-most column:
      https://www.bea.gov/sites/default/files/2021-01/pi1220.pdf

      Line 19: Personal interest income: 1,617.9 billion, annual rate

      Line 20: Personal dividend income: 1,329.4 billion, annual rate

      Line 18 gives you the sum of those two: $2,947.3 billion, annual rate — which is the number in my article.

      The reason interest income didn’t drop more is because most of these interest-bearing bonds – Treasury securities, corporate bonds, CDs, etc. – mature in future years, and the coupon interest payments are fixed until the bond matures. Many of these bonds won’t mature for 5-30 years. And people who hold them will continue to get the coupon interest payments that they have always received on those bonds until the bond matures.

      And in terms interest paid by banks on savings, that was already near zero in December 2019 and couldn’t drop much more – as many people here have confirmed: savers have been getting ripped off for years:

      The average interest rate on US savings accounts: 0.1% (near zero) in July 2019 and 0.09% in Dec 2019. And then it dropped to 0.05% now.
      https://fred.stlouisfed.org/series/SAVNRNJ

      So if a savings account pays 0.1% in interest on a $1,000 deposit, you will earn $1 in interest in one year. So now at 0.9% in interest, your interest income dropped to 90 cents per year. In other words, no real difference… both are near zero.

      The average 1-Year CD interest rate dropped from 0.49% in Dec to 2019 to 0.15% now.
      https://fred.stlouisfed.org/series/CD12NRNJ

      Note that those CDs mature in one year. So if you bought the CD in December 2019, you collected that interest in December 2020, and there was no change in interest income.

      The 1-year CDs people bought earlier in 2019 matured in 2020, and they saw a decline in interest income.

      A $1,000 one-year CD with an interest of 0.5% pays $5 in interest for the year. So when that CD matures and people replace it with a CD that pays 0.15%, the new income is $1.50 per year. So the change in income on a $1,000 investment is $3.50, almost nothing still. But even then, the change won’t show up in the December 2020 data because people won’t get paid that interest until sometime in 2021.

      • Lisa_Hooker says:

        Federal Reserve Notes are worth exactly what a bank will pay you for their use. Apparently they are now worth almost nothing. Depressing, isn’t it? Once upon a time, in a land right here, they were worth saving.

  29. Robert says:

    It’s mentioned that 10 million Americans are out of work. Biden asserts he will offer a path to citizenship for 11 million undocumented. Presumably many of these 11 million undocumented are working at underpaid low wage jobs.

    So I wonder when these ‘new citizens’ will start showing up in the employment reports? It would seem that the 11 million new workers will cancel out the 10 million Americans who have lost their jobs.
    It’s possible that from a statistical perspective no new stimulus will be required to negate the effects of all those job loses. Simply change the way jobs are measured, or who is qualified to show up in the employment reports. Their change in status should at the very least increase the number of jobs on the books. Biden won’t need to do a thing to increase jobs, just recognize the one’s that are already being done off the books.

    Or do the various employment reports not consider those on visas at all? My guess is the whole scenario is ripe for political manipulation.

    • Wolf Richter says:

      The employment reports are based on household surveys and establishment surveys, and go by randomly chosen addresses. They don’t asked for immigration status. So changing immigration status is unlikely to affect those reports. However, people who were illegally in the US and then become legal immigrants might ask for higher wages and better working conditions, since they don’t have to fear deportation. As has been suggested here, it might put upward pressure on wages.

    • Swamp Creature says:

      They just want more people paying into SSA. Illegals get paid in cash. Pay no taxes. Legals pay taxes and SSA.

      • Robert says:

        “They just want more people paying into SSA. ”

        Correct me if I’m wrong, but if all those cash paid ‘off the book jobs’ are converted to ‘on the books’ jobs then we should see a sudden surge in new jobs as part of the establishment survey.

        As far as I know, unlike the household survey which Wolf just mentioned, the establishment report is based on social security numbers or some other government recognized employment number.

        I doubt that people paid cash wages have ever responded to the employment report telephone survey.

    • Lisa_Hooker says:

      This isn’t about workers, it’s about voters. One major party believes it will get almost all of those votes. It’s only fair as that party is paying for them.

  30. Rowen says:

    The stock market makes perfect sense when you realize that it’s not trading on fundamentals, but like every other product, it’s trading on supply and demand. With the shutdown freezing entertainment expenses and student loan interest/payments to zero, the stock market is being flooded with retail dollars.

    • SocalJim says:

      Back in March, it was an easy call that the market was going to do a super rally on fundamentals. How? The economy was really strong because of the reduction in regulations goosed operating margins. Decades of regulations were thrown out.
      Furthermore, slaming the brakes on outsourcing added jobs with rising wages, which is good for stocks. Then, the interest rate collapse jumped the present value of future earnings growth which is the majority of stock valuation. And, the high unemployment plus stimulus filled income gaps. In my area, even though the unemployment is high, I see help wanted signs everywhere. That was an easy call. Likewise, pouring the regulations back on is a real problem for the market.

      • RightNYer says:

        The economy was really strong? LOL. By what measure? A “really strong” economy doesn’t require trillions in new debt every year to maintain, nor does it require 1% interest rates.

        • Cas127 says:

          “A “really strong” economy doesn’t require trillions in new debt every year to maintain, nor does it require 1% interest rates.”

          Exactly.

          The terminal tragedy is that DC’s toxic solutions/illusions “worked” so long.

          People will drink sweet tasting poison until it sickens or kills them.

      • NBay says:

        When the masochist says, “Beat me”, the sadist says, “No”.

        • NBay says:

          And if getting whacked on the butt with a WSJ is what it takes for ya to get it up, well, then ya gotta PAY.

    • Lisa_Hooker says:

      The stock market is not trading on supply and demand unless you consider momentum and the madness of crowds demand.

  31. Nathan Dumbrowski says:

    The government has now proved it has a cure for even a once in a 100 year event which is to print and paper our way out. They used it how many times in the last 20 years. What every could stop them from using this tool to fix anything that gets in the way of USA #1

  32. Martha Careful says:

    After looking around Reddit’s wallstreetbets and threads by various warlords, it seems like 2021 will be totally insane with many more WTF charts and strange disconnects between people that have already been polarized and politicized into extremist terrorists, thus, between the growing circles of political crazies and financial crazies, it’s interesting to see volatility declining and spreads reflecting that financial markets have stability — I can’t decide if that’s a joke or not.

    To wit: Here’s a slightly old bit of research that suggests all is well — and surprizingly, most spreads are well behaved lately. However, it’s weird that as the 10 yr treasury pops up a tiny bit, it’s spread is widening, while the 2 yr yield is going down, and getting tighter (it’s ok, nothing makes sense anywhere).

    The G-Spread Suggests Federal Reserve Restored Calm to Treasury Markets

    Karlye Dilts Stedman, Economist (kansascityfed)
    JULY 08, 2020

    Overall, the behavior of the G-spread suggests that the Federal Reserve’s interventions were effective in restoring liquidity to Treasury markets. The unprecedented speed and scale of these interventions may help explain their success in supporting market function. Going forward, the G-spread will likely provide a useful measure of the effectiveness of Federal Reserve policy in forestalling financial market contagion.

    • cb says:

      So what is to be learned from what FED economist Stedman says?

      That if the FED digitizes dollars and buys T Bills, that there will be more dollars in the system? Is that a revelation or stating the obvious? Looks like a waste of words.

      • Cas127 says:

        The scary (albeit predictable) example is being set by India today.

        Proclaiming the wonders of (gvt controlled) electronic currency while *simultaneously* criminalizing alt coins immune to gvt money printing.

        If people don’t see this as the ultimate in likely economic totalitarianism, the world is going to be entering into a political and economic Dark Ages.

  33. Cashboy says:

    I read that you Americans were getting US$600 a week stimulus cheques (checks).
    Then I read that you are going to have minimum wage of US$15 per hour.
    What is that to complain about?
    US$600/Us$15 is the equivalent of getting paid 40 hours for doing nothing, tax free and no travelling costs.
    No wonder people are spending.
    And you are still complaining?

    • Xavier Caveat says:

      I got a one time $600 payment and am living it up on top ramen, mashed potatoes, the occasional can of chili and a large investment in bouillon in case the financial world goes nutty.

    • Anthony A. says:

      Taxes man, taxes…

    • Swamp Creature says:

      Never got my $600 nor Ms Swamp’s $600. Don’t need the money and don’t have the time to spend it. Went on line and they said there was no payment made. May be because I had no bank account info on my 2019 tax return. Owed money to the IRS that year.

  34. Tom35 says:

    No cutting back for us….at least for the next week. Packed up the gas guzzling truck and headed south.
    Bait store, local brewer, and shrimp and oyster eatery/pub know us well.

    Will do our best.

  35. Swamp Creature says:

    I’d like to see the 4th quarter rates of defaults, foreclosures on VA and FHA Mortgage loans that have been in forebearance. The 3rd quarter rates showed a big increase especially with FHA. This is all occurring with interest rates on 30 year loans at 2.75%. Can you imagine what will happen when interest rates start normalizing?? You’re looking at 30% declines in housing prices.

    Chuck Prince, former CEO of Citigroup Once said:

    “A long as the music keeps playing, we will keep dancing”

    If what happened in the 3rd quarter continues into the 4th quarter, and then into the1st quarter of 2021 and mortgage interest rates start going up then nobody is gonna be dancing no more.

    • Heinz says:

      “A long as the music keeps playing, we will keep dancing”

      Yes, and in this ballroom of the absurd Jerome will keep cutting in to dance with Janet.

      Meanwhile dashing Wall Street rakes are either doing a sweaty tango with naive retail investors or slipping date rape drugs in the punch bowl.

      Rest of us are wallflowers (prudent savers and investors) sitting nervously along sidelines.

      • VintageVNvet says:

        Wonder full H,,, thank you…
        Never exactly been known as a wallflower up to your- very true characterization, as I had an older and a younger sister with whom I was ‘required’ to attend dancing lessons many many moons ago… and learned to like to dance.
        And even though I still do like to dance, I have become very cautious with whom,,, and, as you suggest, have become, besides a happy householder, a very very shy participant in these modern dances.

  36. Depth Charge says:

    Meanwhile, super thin inventories continue on expensive trucks, SUVs, RVs, etc. Makes no sense. I mean, they’ve been back online since last May. There’s no excuse to not be caught back up to demand. People are borrowing and buying like crazy for expensive durable goods. Weird doesn’t even begin to describe it.

    • RightNYer says:

      Why shouldn’t they? The government has made clear it’ll bail out all moral hazard, and that includes keeping all zombie companies alive, so there’s no real risk of losing employment. At least that’s what’s going on in these people’s heads.

    • Bobber says:

      People with wealth are probably realizing its time to use it or lose it. No more easy passive gains to be reaped.

    • Rowen says:

      There’s a massive semiconductor shortage right now affecting auto inventory.

  37. Scott says:

    The majestic overshoot in transfer payments is no “overshoot” at all but rather part of the great reset strategy to lull the Masses into complacency while their rights are completely removed and the stage is set for the final blow. Stay tuned.

  38. Martha Careful says:

    If’n people on welfare had more cash from salaries, they could be buying lots more guns and USA would be greater:

    Government current expenditures: Income security: Welfare and social services, Billions of Dollars, Not Seasonally Adjusted (G160371A027NBEA)

    Producer Price Index by Industry: Small Arms Ammunition Manufacturing, Index Jun 1985=100, Not Seasonally Adjusted (PCU332992332992)

    (Bawhahahahaww)

    • Anthony A. says:

      Martha, besides a shortage of chips for vehicle manufacture, guns and ammo are also in short supply, ammo more so. It took me about two months last summer to obtain one box of 50 9MM cartridges (and they weren’t hollow points).

  39. Drunk Gambler says:

    Long Term Bullish.
    Despite apocalyptic tone of the article, future seems to be bright for me. Long term of course. Consume and invest – universal Keynesian remedy for any recession. And America doing it well. Consumption is holding up and investment actually increased. That doesn’t mean stocks will keep rallying, correction is on the way, especially in Big Tech. But Long Term we will be fine.
    Some people think – this is the beginning of a new Grouth Cycle.

  40. timbers says:

    Comments regarding $15 minimum wage very amusing. The peasants will be lucky if that even keeps up with inflation by the time it’s in affect, and it will likely be far behind housing and assets prices in same time period. Some might say it’s a stealth pay cut.

    So here’s a suggestion:

    Jerome and Janet should impose a mandate that anyone working to administer corporate buy backs, and the Fed’s QE programs, and cleaning bathrooms at Federal Reserve buildings. must be paid at least $15.00/hr effective immediately.

    Some might say this will compression margins on QE and buybacks for the super rich by as much a 0.0000000000001%.

    The economy for the elites is so fragile it could collapse form that margin compression.

  41. Just Checking says:

    Free money for everyone. What can possibly go wrong!

  42. MCH says:

    Wolf,

    Curious, did you ever close your short position that you started back in July/August?

    • Wolf Richter says:

      Nope haven’t covered yet. Still toughing it out. Got very close to covering, at least several times (many times?), lost sleep over it at least once and swore in the middle of the night that I’d cover in the morning, but then a new day came and new craziness, and my theory still held and so I decided to tough it out another day. And another day…

      • MonkeyBusiness says:

        Time to start a new Subreddit called WolfStreetBets.

        #StartTheRevolution

        • Alku says:

          great idea. Should we start with discussing SLV? :)

        • kitten lopez says:

          MB, i just got a huge toothy wolf smile! –yes yes yes. THIS is also what i envisioned with the future Wolf Meets: tables of different plots and schemes, investment clubs, projects, etcetera! an annual event where we can find each other and come up with new ideas not given to us and pre-approved.

          and i wanna fly Petunia in or at least have her on a screen.

          you all have no idea how much time Petunia saves. i can’t believe she hasn’t already been head hunted from here.

          see, Wolf? and i’m not even a proper “witch.” it just seems INEVITABLE because i’ve been sad about the aimlessness of all these beautiful acts of rebellion. but you get some Wolf people in a room, this time with beer and TABLES?

          xxxx

        • MCH says:

          SLV is not enough. GLD instead.

          😜

          All this market manipulation, in the end retail guys like us just need to sit it out or be very careful nibbling at the fringes.

      • gorbachev says:

        The four horsemen of the apocalypse

      • A says:

        I put some dollars in the stock market using some of the shorting stocks you were using, and filling out with the rest of the money I had to spend (aka bet) as I saw fit. (It was very little; birthday money I was using to learn about stocks on Robinhood.)

        I gained some money but didn’t cash out, then lost some of my initial investment with the wonky markets. I realized it was stressing me out and felt so random – not something that was really enriching my life or helping me learn anything. Felt like a roulette wheel, and a boring one.

        Ironically the day before the GameSpot issue hit the news, I had cashed out all my “bets” and transferred my money back to my bank. I only lost a few bucks, so no biggie.

        I guess the roulette wheel isn’t for me. I don’t know enough about it. Planning to close my Robinhood account as soon as possible, and not open one elsewhere.

        • keppered says:

          Yup
          Why try to live with all the stress?
          Especially since the crooked corporate brokers magically decided to shut the little guy out AGAIN!
          Oh please …. I can buy all I want but can’t sell one share?
          uff da
          Glad I got out long ago
          -k

      • MCH says:

        well, the tough part with any short is always timing. The environment is also difficult.

        At least you didn’t do options, they are great as a hedge, but almost always a loser unless you get the timing right.

      • cas127 says:

        I don’t know, but looking at the various historical ratio, price, etc. stats easily accessible over at https://www.multpl.com/sitemap might provide some useful things to mull over.

        I know you have access to tools with much greater analytical power and statistical reach but multpl is quick and dirty and provides a fair amount of historical data. I really just mention it for the benefit of the peanut gallery.

        The metric/ratio insanity played out in 2009+ too (much worse actually, since the QE was slower to roll fully out) but the broad dynamics are probably/possibly similar.

        Except the Master Forger is a decade (and a pandemic) more septic.

        • Wolf Richter says:

          cas127,

          During the Financial Crisis, the S&P 500 PE ratio shot into the stratosphere not because of high stock prices — they were falling by then — but because the banks and other financial companies were posting ginormous losses, therefore pushing the S&P 500 earnings down (denominator). A plunging denominator mathematically drives up the P/E ratio, even when prices are falling. That’s where the spike in the multiple chart came from.

        • Cas127 says:

          Wolf,

          All true but P/E (although far from perfect, since E is so widely gamed) is a decent indicator of things going badly awry in one way or another.

          In 2009+ it was an earnings collapse (without a concomitant share price decline…)

          In 2020 it is a worldwide pandemic massively disrupting commerce…with printed money temporarily blunting E changes and encouraging the delusional to set valuations *higher* (Plague Fears, Disruptions, and Deaths are Pro Growth!).

          Quick and dirty ratio analysis over time is useful because it provides a sanity check on recent trends, prompting questions about whether things have really changed, why, and how sustainably.

          And the more easily accessible stats the better since they provide broader context.

          To get back to your short, I certainly think you have (by far) the more sensible outlook.

          But it does look like the latest DC print orgy, while further damaging America’s future, has kept the financial mkts’ opium dreams undisturbed for the time being.

          (“There is a great deal of ruin in a nation” – Adam Smith)

          …But, index stability/growth is so narrowly concentrated among a few stocks that the Nifty Fifty has become the Please God! Five.

          And, like the Nifty before them, the Five can be taken out and shot one by one.

          …But DC may have gone so far down the road of deranging the American economy that the Five are actually closer to something like substitutes for debauched fiat, lending them a horrifically contingent stability beyond what their own financials merit.

      • The most mysterious part of the market (where PPT does it work?) is the futures overnight. They can move the goal posts with very little effort. Futures used to be where institutions hedged the next days buying or selling. We saw in crude oil how the futures can create intensely oversold situations, and the supply of stocks which is limited could meet a lack of demand, esp if the bond market offers better yields. The size of the monetary base is both cause and effect. Right now the dollar can rise, the dollar is the cost of a dollar, (or dollar based assets) for those who want them and have crummy Euros and crummy Yen and CCP script. As long as the forex system is in relative balance, coordinated devaluation is an illusion but let it get out of balance and things change.

  43. CBD SEO says:

    Yes, this is all very sad, it feels like everything seems to be fine now, but everything will just explode from day to day, it was clear that all this $ 600 a week is terrible for our economy, like the coronavirus itself, but what to do … I’m just wondering what will happen to our budget in 1-2 years, how it will all happen. We really hope that everything will level out and become okay, but something tells me that it won’t be this way …

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