The current divide between Wall Street and Main Street is the greatest in my lifetime.
While Wall Street records record high after record high. Main Street is literally suffering, with thousands of small businesses shut down, and millions out of work.
Making matters worse, Main Street is facing, in the words of Joe Biden a dark winter, as a second Covid Lock-Down is threatened. The likely outcome for this second lock-down is that many, perhaps even most of those small mom and pop businesses that we rely on are at risk of declaring bankruptcy.
From an investment point of view, to assume that this destruction of Main Street will remain isolated there is naive, to say the least.
Although it may feel like one at the moment, Wall Street is not an island. The products that Wall Street makes, and the services that Wall Street offers are consumed to a large degree by Main Street.
In the oft used statistic here, it is the consumer, primarily a resident of main street, who is the primary driver of this economy. Representing up to two-thirds of all the economic activity.
Imagine for a moment that the consumer stops spending. Those discretionary items were pushed aside, and, as was the case in the great depression of the 1930s, the consumer cut back to purchases of only essential items.
The result back then was the deepest depression in our history and a deflationary spiral that took literally a generation to overcome.
We are now right in the middle of the Holiday Shopping Season. The time of the year when retailers across the nation record their largest sales numbers. Forget the 10 months from January until October. It's the last week in November and all of December that really counts.
In In past years there have been some retailers who have recorded as many sales in December alone, as all of the rest of the year. This is the time of the year that department stores, apparel companies, boutiques, and small shops of all kinds live for. This is when profits are made.
That's why I saw yesterday's Redbook Report as so disappointing. Now Redbook is the retailer's Bible. Each week Redbook reports on the last week's sales numbers for retail stores across the country.
And as I have pointed out many times this year, it has been the consumer that has been the real strength of the economy. Recording each week's sales levels that were generally above last year's. Pretty remarkable when you consider that last year was generally Covid Free. And did not have any of the restrictions that we face today.
But I have to report that that string of higher and higher Redbook sales figures came to a halt yesterday. Redbook reported a 2.4% decline in sales for the week ended December 5th.
Now it's way too early to declare that this is a trend. After all, it's only been one week. But what a week. A week right in the middle of Holiday Sales. This really isn't supposed to happen. And especially not happen right now.
So we'll have to watch these numbers even more closely over the next 3 weeks, and hope that this was simply a quirk. A one-off that doesn't happen again.
But if these reports prove to be the beginning of something big. Something like Main Street's declining fortunes. Then Wall Street better lookout. For we're likely to find out, just how badly Wall Street needs Main Street. Without the average consumer, this economy just doesn't work at all.
The Street likes to think of themselves as the Masters of the Universe, and the center of all business and finance.
But the reality is that is it the lowly shopper who really powers this economic engine.