The Rich Are DRIVING THE ENTIRE U.S. ECONOMY (WHILE EVERYONE ELSE IS BROKE!

One of the reasons why a lot of people have been able to point to this economy over the past few years and say that things are good is because of how much rich people actually contribute to making this economy as robust as it seems, okay? Because the vast majority of people right now are pinching pennies to get by but wealthy Americans have been driving this economy for the past... basically since the pandemic, guys. Really, that's the case. Here are some stats for you to digest while we talk about this. The top 10% of earners in the United States make about $250,000 a year or more, are splurging on everything from vacations to designer handbags and this is all because there have been big gains in the stock market and in real estate market. Pretty much any asset you can think of has gone up in value since the beginning of the pandemic and these people now account for 49.7% of all spending which is a record high going back all the way to 1989 and that's according to data from Moody's Analytics. Three decades ago, people in this income category accounted for 36% of all of the spending in the economy so you can see just how much it has increased in the last three decades. In fact, Moody's Analytics estimated that spending by the top 10% accounted for about one-third of GDP while spending by the working class and middle class households dropped over that same time period. Just take a look at this chart as a visualization to give you an idea to grasp just how much and how big of a slice of the spending is accounted for with high income earners. Pretty much everybody else, 90%, makes up only half of the rest of the entire American economy. How crazy is that? And the reason for this is simple. The finances for people who are in this position have never been better. You know, stock market evaluations, all-time highs. Real estate evaluations at all-time highs. And one thing that we've discussed before here on the channel is how when that happens, you have something called the wealth effect. People see their portfolios, you know, skyrocket in value and it pretty much gives people the okay in their mind to go out and spend more money because they know they can fall back on the value of their assets if they have to. In fact, people in the top 10% have been doing so well that they have increased their spending beyond inflation while the bottom 80% of earners are spending 25% more than they did four years ago and they say this barely outpaces inflation, which was 21%. But we all know it was much higher than that. So when you actually think about what the real rate of inflation probably was, closer to 50%, and the bottom 80% of people are only spending 25% more, that means a lot of people are actually spending less now. And to put things into perspective, the top 10% of earners are spending 58% more than they did four years ago. So if inflation was actually very close to 50% over this timeframe, then you could argue that people in that income bracket are just kind of keeping up with inflation. They're just spending, you know, relative to what inflation actually was. That's how I interpret this. But, you know, this situation is quite dangerous because, in fact, they even say here that a stock market sell-off or decline in home values can rattle the confidence of the top 10% and cause them to cut back, which would have a significant effect on the economy. Pretty much what I just said. And to give you an idea of what this looks like, they talked to a family that bought a couple of investment properties between 2022 and 2023 in the Indianapolis area. So probably not too expensive because that's a pretty low cost of living area and they live there as well. They were also able to lock in a sub 3% mortgage on their primary residence to keep their own housing costs low. Meanwhile, him and his wife earn $350,000 a year in total combined, which is 45% more than they did before the pandemic. And they both work in the pharmaceutical industry. I wonder why they're making so much, right? They have two children and they also support their parents who live with them. But, you know, they've also spent money on other things. They bought a $3,000 bike. They noticed their grocery bill going up, but agreed that, you know, buying high quality food was more important than the price of the grocery bill, which I agree as well. And this year they've earmarked about $10,000 to $15,000 for traveling. So it really doesn't sound that lavish if you ask me. It just sounds like they're, you know, upper middle class people that are well-to-do and are trying to make the right financial moves for their family. But they're not out there splurging and really spending a crazy amount of money. Here's also a big difference of what happened to people during the pandemic. There was all the stimulus money that was sent out. And a lot of people saved that money, at least initially. And that's why we saw the savings rate go up. And we also saw the credit card debt start to go down because people were using the money to pay things off. But once people started feeling the full force of inflation, all of that went away, except for the top 10%. Because the top 10% also got some of that stimulus money as well. No matter who you were, you got a stimulus check, okay? And so you were able to save that money. You were also able to save any other money you were able to get from this. A lot of people also saw their incomes go up due to the rising inflation, just like this couple we just talked about. 45% increase in pay over the past four years. It's not bad. Also, a lot of these people already own assets prior to the pandemic or bought early in the pandemic and have seen the massive appreciation in their stock portfolio and in their real estate portfolio. In fact, they say that the net worth of the top 20% of earners has now risen more than $35 trillion or about 45% since right before the pandemic. And that's according to the Federal Reserve. And to give you guys a perspective of how much money that is, the bottom 80% saw their net worth grow by $14 trillion during the same time period. The top 20%, it was $35 trillion, more than double, okay? More than double the amount of money for a much smaller group of people. Even the airlines are cashing in on this as well because over at Delta Airlines, the chief executive at Delta said that they expect a strong appetite for high-end travel to fuel profits this year. And they said the airline sales of premium tickets rose 8% and revenue from sales of main cabin tickets only rose 2%. So clearly, you have a lot more people who are splurging on those higher-end first-class tickets. And the reason I wanted to bring all this up is because what this shows you is just how vulnerable the US economy has become. Because this economy now is only for the rich. And that's becoming apparent with everything. When you see the cost of food, when you see the cost of housing, when you see the cost of a new car, basically everything. And so a lot of people who don't make a lot of money are financing everything to the hilt just to try to keep while it's becoming effortless for people at the top. I'm not bringing this up to make anybody hate rich people because a lot of people did earn that money, right? They had to do something to get ahead in life and they had to make it happen. So we shouldn't be looking down on people for doing that. But I'm bringing it up to highlight just how susceptible we are to an economic downturn. Because since the middle class has essentially been eroded, you know, when you have the top 10% of people accounting for 50% of the spending, that's not really a great position to be in. Just like the stock market, you have the magnificent seven, right? That accounts for like 40% of all of the profits in the S&P 500, maybe even more than that, which is an insane concentration, guys. So if something happens to those magnificent seven stocks, then the entire stock market crashes. Same thing goes for the economy. We've reached a point where we are just getting too concentrated with everything. The stock market's too concentrated. The economy in general and where all the spending is coming from is too concentrated. And I don't know exactly what kind of consequences are going to come of this, but I can pretty much guarantee you with this level of imbalance in our economy, we are going to see some negative repercussions come out of this. In my opinion, one of the negative consequences that we're already seeing is the mass amount of layoffs due to companies not being as profitable as they would like to be. We're also seeing a ton of different stores and restaurants close. Here's a couple of the latest ones. Del Taco, they closed 18 of their restaurants in Colorado with no warning, which was very similar to the poliotropic story I talked about just a few days ago, where they just closed restaurants here in Florida with absolutely no warning. I mean, literally, the phone numbers were disconnected. Online ordering was disconnected as of Thursday morning this week just by surprise. And then they had a sign on the door saying, we regret to inform you that effective Thursday, all Colorado Del Taco locations are closed until further notice. We thank you for your patronage, the memories we created together and wish you well. But what's up with that? Maybe because all of the folks that dine at Del Taco are not dining there anymore. Their profits are down substantially as they decide just to close the store. And my guess is it's probably not the top 10% of earners who are regulars at Del Taco. Just a hunch. Del Taco has been in Colorado also since 2003, guys. So they've been there for well over 20 years and all of a sudden, boom, they're all done. Supposedly, a couple of them in Denver and Colorado Springs are going to be opening back up. But still, this sudden shutdown, just like that, with no warning is very suspicious for any type of business. Usually, when a business is going to be closing down, they warn all their customers. They have going out of business sales, at least stores do. Obviously, a restaurant's a little bit different. But, you know, they're usually not just going to shut down abruptly and say, surprise, see you later. Another one that's in trouble right now is Papa John's. You know, this is the second pizza chain within this week that has come out and talked about how sales are slowing down and they're in trouble. We did a video about Domino's earlier in the week, and they talked about how they're seeing their sales slow down, specifically delivery sales, by quite a bit. Well, guess what? Same thing's happening over at Papa John's. And now Papa John's is predicting that sales throughout 2025 will either remain flat or maybe go up by 2%. Which might be an optimistic outlook, considering that last reading for the end of last year, guys. Because this year, things are only going to get worse as far as people's finances, especially regulars who eat at Papa John's. It's not likely to get better. And once again, I'm willing to guess that it's not the top 10% of folks who are regulars at Papa John's. On the earnings call, the Papa John's CEO said that the company is noticing its customers becoming more cautious about their spending despite recent deals and discounts. So this is the consequence that's already starting to rear its head when top 10% of earners are spending 50% of the money. It means that the bottom 90% don't have enough money to go around to keep all these other companies and all these other businesses afloat, which leads to layoffs and more job losses, which creates that negative downward spiral of the economy that we've already started to go down. The CEO also said that the environment is very much value-focused at the moment, and customers are much more deliberate on managing their overall ticket. Papa John's customers, guess what? They are also avoiding delivery, just like Domino's customers. Papa John's has seen an increased number of customers who are opting to pick up their orders from the store instead of having them delivered. During the fourth quarter, they saw carryouts increased by low single digits compared to the same quarter in 2023. And it makes sense, guys. First of all, if you can even afford to have Papa John's pizza, say, once a week or whatever your frequency is, if you don't live close to the store, you're going to be paying probably at least 30% or 40% more to get that same pizza delivered. And if that's too inconvenient when you add up your time and the amount of gas and everything you have to do to go out and get it, you're probably not going to do it. Versus if you live right down the street, you're much more likely to go carry out. Also, a lot of people are tired of anything that requires a tip, which is also another reason that more people opt to carry out because you save a lot of money on the delivery charge. You save money on the tip. You know, you don't have to tip anybody when you just carry out. So of course, Papa John's is looking at trying to do things to win back customers. They say they're going to be rolling out more competitive offers and they're going to be reinvigorating core menu items, whatever that. So what you see is a lot of these restaurants, especially fast food restaurants, but all of them in general, are starting to have to cater to the value-driven consumer. They're starting to have to come up with deals that entice people to come back in and start ordering amid high inflation. But it's not just restaurants that are suffering from people not having the money, guys. You even have stores like Lowe's, for example. Lowe's, they just issued a warning about consumer spending as well. They're saying that many consumers across the country have deprioritized spending on large discretionary home improvement projects, such as kitchen and bathroom remodeling. And this, of course, comes at a time when home prices are still lingering at all-time highs. So you don't have a bunch of people in general even going out and buying homes to remodel to begin with. And even if they do, chances are they spent all their money on the house and don't have any leftover for the remodel. Lowe's came out with their earnings report for the fourth quarter also, and they only saw their comparable sales increase by 0.2% year over year, which is basically remaining flat, no growth. And this is what the CEO said. He said, despite these better than expected fourth quarter results, we're still seeing a cautious consumer leading to continued near-term pressure on DIY discretionary spending, particularly on bigger ticket projects. Lowe's also saw a 2.2% year over year decline in store foot traffic in the fourth quarter. And throughout all of 2024, they actually saw their foot traffic go down by 3.7% compared to 2023, guys. So people are running out of money, except for the top 10%. But like I said, and that was kind of the point of this whole video, is they can't support the entire economy forever. Rich people even run out of money too. And they only have so much time and bandwidth to buy so many houses and to spend so much money on remodeling or whatever. Just because you have the money doesn't mean you're always going to be spending all of it. Especially if you're a high net worth individual, you've probably gotten there through a lot of financial responsibility. So you might not even spend as much as somebody who makes significantly less than you. So Lowe's is also not expecting to see their sales really go up at all either. They're expecting to see their sales remain flat throughout 2025. And if it does go up, maybe by 1%, so hardly at all. And a quick little real estate side story that the CEO mentioned here, we also expect mortgages to remain elevated, continuing to put pressure on existing home sales and some of the larger projects that are linked to those occasions. So that's another thing I've been telling people here on the channel. Don't expect the real estate market to rebound anytime soon. There is nothing out there happening that is going to get people out there to buy not even lower interest rates, guys. And even Lowe's is trying to put forth effort now to attract back its frugal or lower income customers. They're starting to offer things like clothes hangers and gardening tools, watering cans, all these things that are priced at $10 or below. A lot of these companies are also leaning into their rewards programs. In fact, all of them that I've been covering here are doing that. Domino's, Papa John's, Lowe's, they're all looking at increasing their rewards, loyalty points and things like that to try to entice people to come back in and buy. But one thing that the CEO is kind of hopeful on, which I don't think they're going to see happen at all, is that he's hoping that customers will adjust to facing higher mortgage rates, which could also increase spending on large discretionary home projects. Well, don't count on it. Don't hold your breath. Because yeah, people are getting used to these high mortgage rates. And that's why you're seeing, you know, sales drop to all time lows within the housing market because yeah, they're used to it. They're just not buying it. And this is where it gets really dangerous. And it's, you know, sad that this is what they're hoping for. He goes, we believe at some point, customers are going to get normalized in this high mortgage rate environment. And they're going to start to tap the equity, making the decision that they're going to stay in their existing home, but modernize the home. So we're hopeful that we're going to see that happen. I mean, this is also a bad idea, guys. I've talked about this a bunch of times on the channel. But if you have to tap your home equity to renovate your house, you can't afford to renovate your house. Just wait until you have the money. Do you really want to end up possibly losing your home in foreclosure because you decided to remodel your bathroom? Probably not. But I'll tell you who's not going to be taking that home equity loan to remodel their bathroom or their kitchen. The top 10% guys, those people can afford it. Once we start to see this economic downturn get worse, which I believe we will, because you're seeing a lot of high income individuals start to lose their jobs at these tech companies, at the government and different places where it can have a major impact on people in this category spending money. And as the spending slows down, it's just one big spiral down the toilet with everything. More job losses, more businesses closing, more layoffs. And it just keeps going like that until eventually we reach a point where we can start recovering. So if you guys enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here. And I'll see you in the next one.