The Market Bull – October 25, 2019
The major averages finish Friday with modest gains, closing near new record highs on solid earnings data and more trade war settlement rumors. Since Monday the Standard and Poors 500 Index has gained 27 points or just under 1% while the NASDAQ advanced 106 points or 1.3%.
While there are a lot of headlines to support the strongest economy ever story such as 50-year low unemployment and record real estate and stock prices. There’s also a lot of data that really casts doubt on the idea like the labor force participation rate, homeownership rate and various debt levels, but these stories rarely see the light of day. Tax receipts also have a story to tell and a recent piece by Lance Roberts via RealInvestmentAdvice.com shows that Americans receive more in benefits than they pay in taxes. If that sounds a little odd, it’s because it is. In addition to aggressive rate cuts and rapidly ballooning Repo market operations that belie the everything is great story as average economic growth has fallen to the 2% range in the post crisis period. The benefits received is greater than taxes paid story is the icing on the cake. If employment was indeed as strong as reported by government agencies, then social benefits would not be comprising a record high 22% of real disposable incomes. Some 40 million Americans are on food stamps. An estimated 50% of the 330 million Americans in this country get at least one federal benefit, according to the Census Bureau. An estimated 63 million get Social Security; 59.9 million get Medicare; 75 million get Medicaid; 5 million get housing subsidies; and 4 million get Veterans’ benefits, and these numbers continue to rise.
U.S. households are now getting materially more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression. Data for 2018 showed households received $2.2 trillion in some form of government transfer payments, which was more than the $1.7 trillion paid in personal income taxes. For the record, the only other time government income support materially exceeded taxes paid was during the “Great Depression” from 1931 to 1936.
Standard and Poors 500 Index closed at: 3,022.55 up 12.26
NASDAQ finished the day: 8,243.12 up 57.32
Gold ended trading at: $1,507.70 up $3.00