A look back
2019 was not what I would call a year that I want to remember or have fond memories over at the end, given my crops were planted on time yet still generated crop insurance claims. It doesn’t matter what date they are planted on if the hail storm is intense enough. A high APH and RAMP crop insurance helped save the bottom line. So, let’s shift and look back at the last decade of the 2010s as something being less painful to reminisce over while we try to forget 2019.
The 2010s was really a great decade for the billionaires. Or so I am told. I have no first-hand knowledge. The S&P 500 stock index started 2010 at 1115. It was trading today at 3240 which is over a 290 percent increase over the past decade. 54 percent of Americans own stocks either directly or through funds. Of those who own stocks, the wealthy 1 percent of Americans own 50 percent of the stocks held by U.S. households.
The top 10 percent of American wealthy households own 82 percent of the stocks. Corporations have been huge buyers of stocks post Trump tax-cuts where they have invested their tax savings. The bottom 80 percent of public stock ownership has shrunk from 16 percent of Americans in 2013 to being owned by just 7.75 percent today.
Most 401Ks do not amount to much. The 1 percent own over $1,000,000 in stocks, the next 40 percent own $132,000 in stocks while the rest average $54,000.
While Trump praises the gains in the stock market, the majority of his supporters own none. Gold started the decade at $1139 ounce and was $1512 ounce as of this writing, up 32 percent over the decade. It is estimated however that just between 1 percent-3 percent of Americans own gold so the gold market affects few. 65 percent of Americans own their homes. Home values started 2010 at a median value $175,000, bottoming out from the sub-prime mortgage fiasco in 2012 at a median value of $160,000. As of November, 2020, they had appreciated to a median value of $248,000. That means that the decade added 41 percent to the value of homes (albeit from recession lows).
Iowa farmland values started the decade at an average $4,371 acre according to ISU, ending it at an average $7432 this year…a $3061 acre or 41 percent increase in value. Median household income increased from $49,445 in 2010 to $63,688 this year up 22.3 percent. Unfortunately, it takes $1.18 now to buy what $1 did in 2010.
The CPI has risen 18 percent over the decade. That is not much less than the increase in median income. So, if many people feel they are being left behind in this economy that is because they are. It has been a horrible decade for wage-earners overall although wage inflation was starting to pick up given record employment in 2019. Hikes in executive pay however have left inflation in the dust. Inflation was only a problem for the poor in the 2010s.
As noted, it has been a great decade for billionaires regardless of what they thought of their counterpart in the White House. Carl Icahn should have had a great decade if only for all the RIN waivers. He essentially saw to it that the EPA, who he chose the administrator of, Scott Pruitt, bequeathed the RINs to him. Forbes says that the world’s 10 wealthiest people in the world added $534.8 billion to their fortune since 2010 over the decade. Of Americans, Amazon CEO Jeff Bezos added $117.4 billion to his wealth despite the most expensive divorce in history. Bill Gates added $55.5 billion, Warren Buffett added $42.3 billion. He is still worth $47 billion after giving away $37 billion. Mark Zuckerman was only worth a measly $4 billion in 2010 while today he is worth $76.8 billion. Larry Ellison added $38.1 billion to his net worth this decade. Larry Page added $43.9 billion.
There are some signs that the massive wealth generation at the top is starting to trickle down. The risk is that an accelerated increase in wage inflation will just feed inflation. Rising cost of living would eat up the wage gains. I have explained how there is a consuming economy and a producing economy. There was an uneven financial performance this past decade for both. While there is high employment and solid economic growth, what is most important is the perception of financial success. Are things getting better or worse financially? 57 percent of Americans say they are getting better. That perception has trickled down even if little wealth has. Ironically Donald J. Trump (DJT) has done something few would have thought possible…pad the billionaires’ wallets while being seen as a populist.
Soybean prices are roughly 30 cents bushel higher as we end 2019 than they started the decade in 2010. Wheat is up 60 cents a bushel, start to finish. Corn was the loser, down approximately 25 cents from 2010.
How about yields? The oldest crop insurance yield I have was 204 bushels per acre (bpa) from 2015 which compares to 233 bpa today. At least the yield went up 12 percent in the past 5 years even though the price didn’t.
Agriculture is part of the producing economy that is not doing well. 42 percent of net farm income will come from subsidies, crop insurance indemnities, disaster aid and MFP payments this year. The ag safety net deployed in order to catch what otherwise would have been a disaster for us. Ironically, U.S. manufacturing has been in recession but should begin to heal given the time-out in the trade war. Soaring health care costs, record college debt from tuition hikes and a falling life-expectancy from a rise in suicide and opioid drugs weighs on the country, with few if any solutions offered. The opioid epidemic is inclusive of all demographic groups but related most closely to regions and incomes groups that have been left out of the economic growth of the decade. The poverty rate was declining, post Great Recession, well before DJT took office. DJT took care of the problems that billionaires had in his first term.
All of the trends prevalent at the end of this decade are likely to accelerate into the next, boosted by the election year. There is great skepticism that the economic strength reflected by equity market gains can repeat in 2020. White House Trade advisor Peter Navarro says that he thinks the economy will boom in 2020 and that the DOW will go well over 30,000 next year. It is 2021 that would worry me.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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