IT has been a great 15 months if you are rich or want to be.
News item: “A record 493 new faces joined Forbes’ World’s Billionaires list this year—roughly one new billionaire every 17 hours between March 2020 and March 2021—including 98 newcomers from the US.”
Elon Musk saw his net worth go up by $144 billion. Jeff Bezos added $86 billion. Page and Brin at Google are a combined $83 billion ahead of 2019. It is, of course, all because of the stock market and the Federal Reserve keeping interest rates at a 5,000-year low. Other newly minted billionaires include Kim Kardashian West, moviemaker Tyler Perry and Apple CEO Tim Cook. There are also those “front-liners” fighting the Covid pandemic. August Troendle, whose Medpace helps pharmaceutical companies run clinical trials for Covid-19 drugs, and three American shareholders of Covid vaccine developer Moderna: Timothy Springer, Noubar Afeyan and Robert Langer are all now billionaires.
But it is not just the super-duper rich that are in the stock market. Stockholdings among US households increased to 41 percent of total financial assets in April, the highest level on record. That is according to JPMorgan Chase & Co. and Federal Reserve data going back to 1952 that includes 401(k) retirement accounts.
While Joe Biden is not too happy and said, “Twenty million Americans lost their job in the pandemic,” he also went on to say “no one should have to choose between a job and a paycheck or taking care of themselves and their loved ones, or parent or spouse or child.” Absolutely. In modern society, no person should have to make that choice.
However, the US Federal Government has been helping to this extent. A record 34 percent of all household income in the US now comes from the government.
“Personal Current Transfer” payments are essentially government-sourced income such as unemployment benefits, welfare checks, and so on. In March, this number exploded to $8.1 trillion annualized, which was not only double the $4.1 trillion from February, but was also $5 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.
Personal income excluding government handouts would be virtually unchanged from a year ago in March 2020 at $16 trillion. In a real sense, Americans got a “pay increase” as measured by household income from last year.
We know that government cash payments to people do not affect their desire to work an actual job. Except, a March survey of members by the National Federation of Independent Business found that 42 percent had job openings they could not fill. That is the highest since the survey started in 1972. A study released last month by the National Bureau of Economic Research found that a 10 percent increase in unemployment benefits during the pandemic led to a 3.6 percent drop in job applications. OK, I am not completely buying that as being a correlation and not just coincidental. But the point is, for all the pandemic pain, there is a lot of money rolling around.
Here is another news item. “While 4-week T-Bill rates dipped negative on occasion, last time the 4-Week Bill priced at a 0.000 percent interest rate was during post-Covid crash scramble in March 2020. Moments ago [last week], US Treasury sold $40 billion in 4-week bills at a price of 100.000 percent representing a [interest] rate of 0.00 percent.”
There is a direct correlation between stock market billionaires and zero interest rates. And also, with the government providing 34 percent of a family’s income. The government can borrow money for free on a loan it will never pay back. Party like it’s New Year’s Eve 1929.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.