June 1, 2020
When it comes to the US economic information we get as citizens and consumers, the numbers we hear from the politicians (and the often lazy corporate media) is mostly domestic political economic propaganda.
In fact, the rhetoric of these financial self-interested parties is either largely big lobby money talking points designed to keep voters thinking the politicians and their corporate paymasters are working for the average American - or just plain financial gossip meant to create advertising sales drama in the lives of Americans. Additionally, most of the cable TV pundits are either selling a book, hawking their expertise and services, or just plain using media as political propaganda!
And given the self-destructive gullibility of at least 40% of Americans, it is no wonder the United States has just over 4% of the world population yet has 1/3 of all the Coronavirus deaths in the world.
For those functionally paranoid Americans who need a "Deep State" conspiracy to make themselves feel better for their own failures, why don't we simply "follow the numbers" to identify what the so-called "Deep State" actually is:
The real and obvious "Deep State" is the two party corporate lobby money owned political duopoly that tries everything they can to keep the general public (the American middle class) with just enough working income that they can get just enough credit to buy just enough stuff to keep the illusion of the American Dream going as long as possible.
As far as poor and lower-income middle class Americans (of all races) go, the two party lobby money political economic system has given up on caring about them years ago.
To make financial matters even worse, the election of Donald Trump with his reckless deregulation pro-Wall Street lobby money economy, we can generally ignore what the performance of the large company stock market indices (Dow 30, S&P 500, etc.) indicate about the overall health of the entire US economy.
Why? Because the huge multinational companies in the large company US stock markets indices (Dow 30 index, S&P 500 index, etc.) are the primary contributors of tons of lobby money that buys the loyalty of the "legally corrupt" Federal politicians.
If the reader hasn't figured it out, the big lobby money corporations (and their lobby-money trade associations) literally write the national business & tax laws FOR the compliant pro-Wall Street politicians - who submits the lobby money written legislation for almost certain approval.
And why does this matter? Because the lobby money written laws clearly favor the economic success of the largest US companies, their profits, their executives' compensation packages, while at the same time fostering the growing monopoly control of the US economy and the American workforce.
The proof is in the numbers - if one wants to know the truth and are willing to stop denying the realities driving the US economy.
For example, since Trump slithered into the White House in January of 2017, the large company stock indexes have far outperformed their smaller US company indexes.
As highlighed below, the underperforming small and mid-size company stock indexes directly represent the 2nd (lower) class status of the "Main Street" economy and a majority of American workers.
Look at US stock market performance during Trump's first 3-years (pre-Pandemic months) in office (Feb 1, 2017 through January 31, 2020):
SPY (500 Large US companies): + 52% (16% annually)
IWM (2000 Small US companies): + 23% ( 7% annually)
MDY (400 Mid-Cap US companies: + 26% ( 8% annually)
It is plain to see the US Standard and Poor 500 stock index (symbol SPY) doubled the performance of the Russell 2000 Small Company stock index (symbol IWM) and the Mid-Cap 400 stock index (symbol MDY) respectively.
These stock market performance numbers tell us everything we need to know about our legally corrupt Wall Street "pay-to-benefit" US political economy.
In fact, a functional national "best economy ever" (as Trump loves to proclaim) scenario that benefits all Americans would NEVER be so lopsided in favor of the largest American "big lobby money" companies as we clearly see above.
The reason is very simple: The current US economy, especially under the Trump - Republican "economy" - which callously states: You should go to work even if you are in danger of getting Covid-19 and possibly die - has now become the lobby money "death panel" financial system.
Yet Trump is only the latest "extreme" example of the ugly American lobby money "pay to play" political economy. Yet to a lesser degree, it has been a slow progression in that directly since the pro-Wall Street, anti-government administration of Ronald Reagan.
But make no mistake: Donald Trump and his right wing evangelical kleptocarcy is taking the dismantling of the US worker economy to another level - creating an anarchistic American oligarchy that is only on display in countries like Russia and a few other authoritarian-run economies.
It is staggering ironic that the politicians and voters who call themselves "conservative Republican" or "pro-growth Democrats" both claim they support the US small business owner - and their "hard work" that is supposed to represent the equal opportunity attainment of the American Dream.
Yet the facts speak otherwise: The elite lobby money controlled two-party political duopoly - especially after this Covid-19 nightmare - the current "profits over lives" US political economy - has created anything but the "best economy ever" for the lower 80% of the US consumer economy
The US stock market that is the real US economy
The large company stock indices (Dow 30, S&P 500, etc.) are no longer valid economic indicators for the underlying strength of both the overall stock market and its reflection of the US economy.
Even before the Coronavirus hit, the upward trend of the US stock market was being dominated by fewer and fewer very large companies. It’s the first and most obvious sign of a weakening and exhausted stock market.
The Coronavirus simply forced the very overconcentrated and narrowing upward trending US stock market to come tumbling down earlier than expected.
In an election year, Trump was doing all he could to keep his meager growth - skyrocketing national debt (and low-paid worker) economy hidden, as least until after he was re-elected.
Covid-19 only accelerated the inevitable weakening US economy into a failing stock market - and due to his Administration's deregulation agenda - the early signs of a ineffective US Federal government (as we see very disconcertingly with the chaotic Federal response to Covid-19).
Look at history. In the post-Vietnam America, almost every time Americans elect a "privatization" Republican president, we see a major market collapse some time in his second term. We saw it after George W. Bush, his father, and even Ronald Reagan. And Donald Trump is the "extreme" deregulator!
In Trump's case, the Coronavirus simply accelerated the inevitable 2nd term recession into his first term.
Sceptical? Remember that we did not see any major stock market recessions during both 8-year terms under Bill Clinton and Barack Obama? That's not coincidence!
The reason is obvious to non-ideologues: 1) Clinton and Obama did not - as a national political economic policy - dismantle most government programs for future privatization AND 2) Clinton and Obama hired much smarter and top-level advisors who were mostly academics, not ex-lobbyists and anarchistic anti-government ideologues.
For their so-called "conservative" poltiical economic tenets, Republican leadership ideology is really all about "starve the government tax beast." In effect - "Make government fail so they can justify privatizing any government service the public can be duped into accepting."
And, now, during a very harsh economic response to the Covid-19 crisis, the last thing Americans need now is a dysfunctional "profit over lives" mindset from the cult-like "free market fundamentalists."
Be aware: If the current Trump / Republican gamble of opening the US economy by relaxing the Covid-19 restrictions is too earlfy and fails - and we see a huge second wave of Coronavirus contagion and deaths, say hello to President Biden, a Democratic-controlled Senate and House, and some different neoConfederacy state Governors.
How to tell what the real US economy is doing through these 4 stock market ETFs
For your edification (and factual thinking), here are the 4 most important and under-acknowledged economic / industry sectors that actually represent the true health of the entire US economy, which I recommend that you keep track of to help you understand the strength and weakness of US stock market:
Russell 2000 Stock Index (symbol IWM) - This US stock index represents 2000 domestic smaller stocks, an excellent gauge of the health of many small and mid-cap companies that manufacture and distribute goods and services within the United States.
Like we are seeing now in a financial crisis, IWM is also a leading stock market indicator whenever the politicians can no longer hide a weakening US economy in spite of their lobby money favoritism - which is always expressed through paying the politicians to write tax laws benefiting the rich and the most powerful corporations - or by passing bigger and bigger Wall Street bailouts.
Retail sector (symbol XRT) - Mainly brick and mortar retailers, these companies largely control the family budget, when we aren't in a pandemic lockdown. Almost 70% of the GDP is driven by consumer spending - so it’s an excellent measure of the strength of the “Main Street” U.S. economy and consumer confidence.
Of course, the US Retail sector has been ravaged over the last 20 years by the likes of Wal-Mart, Costco, Sam's Target etc. - and more recently by Amazon. But such a local retail success ravaging would not have occurred if US consumers cared about their local economy and supported local businesses, even though consumers had less and less money to spend due to political cooptation.
Regional Banks (symbol KRE) - The small business and consumer bank company stock index. Regional Banks measure the health of the financial system in the U.S., where many local folks put their money.
Regional banks are also the key to the US economy because they measure the health of not only the financial system in the U.S. KRE is also a reliable indicator of what the Federal Reserve might do regarding raising interest rates, and how consumers are behaving concerning saving and borrowing habits. Also, whenever the US economy get overheated, regional banks are the first US sector to signal a weakening economy.
Transportation (symbol IYT) - Good indicator of economic health as the movement of goods and services across the country is the lifeblood of the economy. The market direction of the IYT is a reliable way to measure industrial and manufacturing strength supply and demand.
However, there are are two additional “growth sector” ETFs that are valid stock market indicators of the future of an innovative US economy:
Biotechnology (symbol IBB) - Watching the biotechnology ETF is a great way to assess where speculative investor money is flowing. if IBB is moving up, it’s an excellent indication that investor sentiment is also bullish.
Conversely, should buyers abandon biotechnology, it can be an early warning that sentiment is getting more negative, suggesting when investors might prefer to sit on the sidelines.
Semiconductors (symbol SMH) - The Semiconductor industry is on the forefront of innovation and a major player in many of the strongest technology trends. As a result, the U.S. semiconductor industry has become a major innovator among all U.S. industries.
Together, these six sector investments described above provide a succinct way to assess whether 90% of Americans are benefiting from America’s “lobby money” controlled political economy.
In the end, when the lobby money politicians make taxpayers bail out corporations that pay no taxes - or companies managed by speculative megalomaniacs who expect the government to save them from their own incompetence - we will almost always see the Russell 2000 (IWM) leading the overall stock market down!