Getting ahead of itself, Wall Street continues its long slog up the mountain, adding 211 points today to the Down Jones Industrial Average but off 150 point from its morning highs. Wall Street shrugged off more bad news on the unemployment front, with another 3.189 million filing for initial unemployment claims, bringing the total since March 20 to 33 million. Shattering more unemployment records, that nation’s unemployment rate stood at 20%, up from 3.5% before the coronavirus AKA SARS CoV-2 or Covid-19 decimated the U.S. economy, or, more accurately, elected officials decimated the economy. Yesterday’s “shocking” report read by New York Gov. Andrew Cuomo that 66% of New York hospital admissions came from residents who were “sheltering in place” prior to getting sick. Cuomo’s report suggests that infectious disease experts took the wrong tack.
Trump’s Coronavirus Task Force led by 80-year-old Dr. Anthony Fauci and Dr. Deborah Birx urged Trump in the strongest possible way to shut down the U.S. economy, essentially ordering U.S. citizens to “shelter in place.” With businesses, large and small, no longer to operate, the economy has gone down hill ever since. But now that it’s known that two-thirds of New York residents hospitalized for coronavirus got it sheltering in place, elected officials must question the advisability of continuing to keep the economy locked down. Trump has given governors the right to decide what’s best for individual states, with some states like California following the old prescription for slowing the virus by sheltering in place. When you add up the disastrous effect on the U.S. economy, it looks like shelter in place has caused more disease, death and destruction to U.S. citizens.
Dr. Fauci and Birx don’t look at the big picture, only the narrow-minded guidelines for dealing with a global pandemic. Infectious disease experts don’t consider the unemployment, poverty, disease and death caused from plunging the U.S. economy into a protracted recession or possible depression. When you ask Fauci or Birix to deal with unemployment, poverty, disease, death, suicides, anarchy all connected with unemployment they have no answers, largely because it’s not their bailiwick. Trump’s instincts to open up the economy couldn’t be more urgent, with CARES Act cash bound to run out soon. California Gov. Gavin Newsom continues to cite medical authorities to justify keeping the state shuttered far longer than necessary. Today’s press has repeated the argument that if you don’t keep “shelter in place” orders, more people are going to get sick and die.
Yet Cuomo’s recent findings should alert infectious disease experts that the benefits of sheltering in place, at least at this stage to the coronvirus epidemic, no longer outweigh the damage to citizens’ lives from prolonged unemployment. When you look at anarchy in any society, it usually comes from prolonged unemployment, where the ruling authority cannot product enough jobs to keep citizens working. “Idle hands are the devils work” refers to what happens when there are no jobs to keep people occupied. Wall Street can look to the future, whether recent or distant, to forecast better economic times. But if you look at the dramatic loss of corporate earning, in a wide swath of the economy, it’s unrealistic that Wall Street can sustain its current buying mood. Unemployment and the economic fallout continue to rise, with the Labor Department expected to report more bad news tomorrow.
Without the CARES Act bailout for hotels, airlines and cruise ships, bankruptcies would be skyrocketing, far worse than the 2008 Financial Crisis, where bottom fell out from the mortgage-backed securities industry. Real estate new and existing home sales have tumbled, despite record low interest rates. Like other industries wracked with unemployment, the real estate market is no different. When ordinary citizens have no expendable cash, they’re not looking to buy real estate. Ford and General Motors have also taken billions in write-downs as sales and forward earnings look bleak into the indefinite future. Shutting down the economy to save an unknown number of lives with the coronavirus epidemic has caused a raft of other problems, including driving ordinary workers into unemployment, poverty, homelessness and more disease, suicide, violence, alcoholism and drug addiction.
When 67-year-old Federal Reserve Board Chairman Jerome Powell slashed interest rates to zero March 15, he recognized that a serious recession was imminent. Powell tried to get ahead to today’s record unemployment, now exceeding 20% nationwide but likely to get much worse in the weeks-and-months ahead. Wall Street can rally all it wants but eventually decimated earnings will cause today’s averages to fall dramatically, much like it did March 23 when the Dow closed at 18,213.63 over 40% below its Feb. 12 record high of 29,551. Closing today at 23,875.89 is a spectacular comeback from its March 23 low, only 20% off. But it’s unlikely the Dow, Nasdaq or S&P 500 can sustain current levels when corporate earnings, bankruptcies and mortgage foreclosures continue to rise. It’s hard to stay in a buying mood when unemployment could hit 30%, Great Depression levels.
