These are good times, aren’t they? Record high S&P 500. Record high NASDAQ. And chart after chart after chart of the economy that looks just like this:
Hey, if that isn’t a “V”, I’m not sure what letter of the alphabet it is! So, yeah, good times. All is well.
From where I sit, both figuratively and literally, I am surrounded by great wealth. Put a thumbtack on the homes of Tim Cook, Mark Zuckerberg, and Larry page, connect ’em with string, and you’ll find me dead in the center (although with a skosh less equity). I’ve lived in Palo Alto since 1984, and I had never even seen a Lamborghini in town until this year. Now they’re a common sight. Including the guy a block from here who just parks his on the street, letting it get dusty. The wealth is getting grotesque.
Look downtown, though. Stroll with me down University Avenue. Maybe join me on some of the side streets. Or maybe let’s pop over to the next town north, Menlo Park, which is just like Palo Alto except it only has white people. Walk up and down Santa Cruz Avenue with me and take note of the empty storefronts. For Lease signs on every third door. And the sad attempt at outdoor dining, with waiters in masks serving customers at rickety tables, trying to bring in some revenue to keep their restaurant from going under.
Since the late 1970s, the middle class of America has been getting hollowed out. But this is another level altogether. We aren’t just talking about union workers from GM. As I open my eyes to what is going on around me, what I see are two worlds. One world is the upper echelon of the large tech companies, and the people therein with more money than they know what to do with.
The other world is…………….everyone else. and included in that cadre are all the small business owners and employees who got thrown a life preserver earlier this year but who are starting to face reality without a big electronic deposit from the federal government shoved into their account. The PPP is long gone. The EIDL from SBA is fully allocated. Now they need revenue. Sales. Customers. And although there are some, it’s nothing like it was before.
I’ve never been involved in the restaurant business, but from what I’ve read, a restaurant is designed to basically be full. If you have a steady stream of customers and a more or less packed house, then you’re all set. Margins aren’t huge, but there’s ample enough revenue to cover your nut and grow the business.
Carve away 40%, 60%, 80% of those customers………….or try to rely on some outdoor tables set up on what used to be the street in front of your establishment………….and you’re just going to bleed out. And it won’t take long. The only reason these places are still even somewhat in business is because they got a cash injection a few months ago, but that was a one-hit wonder.
In precisely ten weeks from the very moment I am typing this, we are going to start getting the results of the 2020 election. It’s going to be here before you know it. And between now and then, the folks in D.C. are going to throw as much cash, credit lines, forbearance, and assistance as they can possibly muster to continue the simulacrum of a normal economy. We’re all just going to smile and pretend that not only are things going to be OK, but that they’re already pretty OK. Honest.
But they aren’t. Just beneath that veneer is an ocean of rot, and it’s all going to become painfully evident once the politically-driven artifice of support is dismantled.
They speak of the prospect of a “second wave”. They’re talking about the virus, of course. But whether that comes or not, I have no idea. The second wave I do believe will be coming before this year is over is in the form of an economic reality check. Apple and Tesla are doing great, thank you very much, but at its core, American business is suffering, and I believe if you can cut through the din of daily lifetime highs on the megacap stocks, you’ll hear the gasps of suffocation from the businesses not blessed with a popular ticker symbol.
