A lot has changed in 11 years. But not this.
Not Pretty, Not Rich is a newsletter meant to keep you up to date on what’s happening in the world, and how you can position yourself to take advantage.
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It’s Friday, August 7, 2020.
In the news
Here are a few key news items that you should be aware of:
“It is what it is.” This was the president’s response to the ever-climbing COVID-19 body count during an interview with Axios reporter Jonathan Swan. Whether you like the guy or not, it’s worth watching the interview in its entirety to get a sense of how our leader(s) are handling, and thinking about, the outbreak.
An insane explosion leveled part of Beirut. If you haven’t seen the videos, take a look. It seems the explosion was caused by discarded ammonium nitrate, which is the same stuff used in the Oklahoma City bombing in 1995. It makes you wonder: Where are other piles of this stuff laying around, ready to blow?
July’s unemployment report came out today. The U.S. added 1.8 million jobs last month, and the unemployment rate dropped to 10.2%. A surprise, but a welcome one.
The stock market’s ceaseless march
While the economic recovery has stalled, the stock markets keep gaining steam.
As many of you know, I’ve been flummoxed as to how and why the stock market has recovered so quickly from its lows in March while the economy at large has crashed and stagnated. I don’t think it’s a bad thing, necessarily, but it does show that there’s a disconnect between the markets and the real world. Especially for the millions of people who are out of work and struggling to pay rent and those who are using the opportunity to buy up stocks.
There are a few things that explain it. For one, the market is top-heavy, and the companies that have continued to grow and see their share prices increase have been largely unaffected (or have been positively affected) by the current crisis. That would include companies like Google, Facebook, Amazon, and Microsoft. Also, the market is forward-looking — that is, investors know that, at some point, we’ll get a vaccine and the U.S. economy will snap back.
I came across a piece that gives another reason the markets keep powering through: The way they’re structured.
Barry Ritholtz writes for Bloomberg:
“The most visible and economically vulnerable industries are also among the smallest, based on their market-capitalization weight in major indexes such as the S&P 500. Markets, it turns out, are not especially vulnerable to highly visible but relatively tiny industries. The 30 most economically damaged industry categories could be de-listed before tomorrow’s market open, and it would hardly shave more than a few percentage points off the S&P 500.”
Some of those highly-visible industries could include department stores, airlines, and travel services, which have all suffered tremendously over the past few months, but make up only a very small part of the overall stock market. So, while we see first-hand our flights getting canceled, retailers permanently closing, and hotel workers getting laid off, it doesn’t have much bearing on the market.
“The market is telling us that these industries just don’t matter very much to stock market performance. And the sectors that do matter? Consider just four industry group -- internet content, software infrastructure, consumer electronics and internet retailers -- account for more than $8 trillion in market value, or almost a quarter of total U.S. stock market value of about $35 trillion. Take the 10 biggest technology companies in the S&P 500 and weight them equally, and they would be up more than 37% for the year. Do the same for the next 490 names in the index, and they are down about 7.7%. That shows just how much a few giants matter to the index.”
The key takeaway from this, I suppose, is that the stock market is not the economy. And we probably shouldn’t expect what we’re seeing on the ground to necessarily correlate with the market charts we see on financial news networks.
The federal minimum wage hasn’t been increased in 11 years
States and cities have taken the initiative, but federal lawmakers haven’t touched the minimum wage in more than a decade.
This was a figure that caught my eye that I thought was worth sharing with you all: The last time the federal government raised the minimum wage in the U.S was in July of 2009. An increase on the federal level would mandate that all employers across the country raise their wage floor, with the exclusion of tipped workers in some states.
But looking back at how much has changed over 11 years, I still find it incredibly surprising that the federal minimum wage hasn’t been increased, or at least chained to inflation or the CPI. Right now, the federal minimum is $7.25 an hour, or $15,080 a year.
Now, we know that many states and cities have pushed ahead with their own increases. Cities like Seattle and New York, for example, have $15 minimums, and research is ongoing as to the effects of those increases. One thing researchers do say, as they’ve told me, is that a $15 wage floor would likely work (and does work) in some places, but not others.
I’m not going to use this space to argue for a minimum wage increase right now, but I did think it was something work bringing to people’s attention. I know plenty of people think that we should do away with the minimum wage altogether. But I think it’s a bad sign that our minimum wage laws haven’t been updated since the iPhone 3 was released.
This week’s numbers and links
$30: The price that silver is currently flirting with, per ounce. I bought a 1-oz. silver coin a few months ago for only $17.
$42.8 billion: What Jeff Bezos would pay in taxes under a new proposal from Bernie Sanders that would institute a one-time 60% tax on wealth gains made by billionaires between March 18, 2020, and Jan. 1, 2021.
75: Years since the U.S. dropped atomic bombs on Japan to end World War II.
Crime is way down over the past few decades. But many Americans believe crime rates are increasing.
My hometown baseball team, the Spokane Indians, has taken an alternative approach to dealing with its mascot: It’s embraced the tribe, the tribe has embraced the team, and it all seems to have worked out. Even the uniforms’ text is written in the tribe’s traditional language.
Read about the strange phenomena of “harbinger zip codes,” which are areas that buy failing products in higher numbers (they loved Crystal Pepsi) and almost always pick losing political candidates.
Until next time,