Where is the Recovery?
Last night I made the big mistake of watching the US presidential debate. I do not watch any TV news or read any newspaper on purpose for 4 + years. I do not even go to news related web pages unless a friend or family asks me to go to. I do browse economic news and web sites, and there is politics and current affairs there, it is unavoidable; but I try to stay as far away from politics as I can in the popular conventional media. It serves me well, as I am a deeply political person! LOL.
My reason is simple. Mental and physical health. I get worked up reading, seeing, hearing conventional news media and twitter on US politics, and it is detrimental to my health. So, I choose to escape. However, I am a deeply political person, and I miss it at the same time. No, I do not miss the stupidity, I miss the political process. So I decided to tuck my kids in early (it was a struggle) and turned on the TV at 8pm. What I listened is not something I want to talk about, just one element that triggered a thought and that I think is relevant to LeoFinance in general. The current incumbent President like to boast that the US economy is doing great, stock market is doing great and small business is doing great therefore (people attached them one and the same). Well here is the rub:
Stock Market is NOT the Economy!
Please look at the above plot which shows what is happening to the small businesses, which is a much better indication of the Economy.
Fact: US Stock Market is trading at near 52-week High. Current incumbent President said last night that Obama Administrations “Recovery” was puny and he made two points:
- It was the slowest recovery and smaller that what his current administration had (in terms of stock market): WRONG
- It must be a good recovery in the previous administration as we were coming out of the financial crisis of 2008: WRONG, what about the second term?
There is not point to fact check the Orange Guy, who is a pathological liar. However, it is educational to look at the chart of S&P 500, in terms of the previous terms. Both two terms of Obama Administration and the current Trump administration, enjoyed the same continuous bull market in the stocks.
Obama term 1 = about 90% rally in stocks,
Obama term 2 = about 60% rally in stocks,
Trump term 1 = about 66% rally in stocks
Again, in terms of numbers, they are all similar I will argue, and all market of the uninterrupted bull market for nearly 12 years now. Average of 10% rally per year is considered very healthy in Vanguard’s standard. 15%/ year is considered phenomenal, and people are asked not to count on it over long term. But here we have it…. And average of 15%+ rally each year for 12 years! That’s a decade. That is sometimes half the working life of an average American!
Disconnect
Getting back to the first plot, across the United States, somewhere between 50% - 25% small businesses remains closed, now for 6 months +. I can show you a picture of downtown Houston, which by the way, is one of the places doing better than the rest of the country, mid-day of one of the busiest streets. Normally, at lunch time, it will be full of traffic and office people walking along side the street to grab lunch. As you can see from the picture, it remains empty.
I walk the downtown a lot. I assure you, that 70% of the food places in downtown remain closed. It is better outside downtown, which can bring the average up to 30%-40% closure of all small business (the plot shows 30% for Houston, in general). But the critical fact remains. Lot of these small business closures are permanent. Even lot of the commercial real-estate occupancy in downtowns are permanent. They are not opening, EVER!
Now tell me, how’s the economy doing?