by Gary Alexander

November 17, 2020

Congress first convened in Washington DC 220 years ago today, on November 17, 1800, in an unfinished Capitol building. Pretty soon, a bunch of them got sick. It was in a muddy and undrained swamp, after all.

From 1776 to 1800, this new nation had nine capitals – Philadelphia, Baltimore, Lancaster, York (PA), Princeton, Annapolis, Trenton, New York, then Philadelphia again, and finally Washington, DC, which was a compromise to please southern states, who argued New York or Philadelphia were “too far north.”

Early Washington DC Images

However, it’s likely that the filthy waters of the DC swamp killed three presidents in one decade (1841-1850), according to research published in “Clinical Infectious Diseases” in 2014, long before COVID-19:

Historians have long maintained that pneumonia killed William Henry Harrison (1773–1841) just 1 month after he became the ninth president of the United States. For more than a century and a half, it has been alleged that the aged Harrison caught a fatal chill the day he was sworn into office while delivering an overly long inaugural address in wet, freezing weather without a hat, overcoat, and gloves. However, a careful review of the detailed case summary written by his personal physician suggests that enteric fever, not pneumonia per se, was the disorder that carried off “Old Tippecanoe.” Two other presidents of that era, James Knox Polk and Zachary Taylor, also developed severe gastroenteritis while in office. Taylor’s illness, like Harrison’s, proved fatal. In all 3 cases, the illnesses were likely a consequence of the unsanitary conditions that existed in the nation’s capital during most of the nineteenth century. – Clinical Infectious Diseases (2014)

So, the capital’s infected swamp water killed presidents Harrison, Polk, and Taylor (1841 to 1850) long before assassins’ bullets killed three later presidents, Lincoln, Garfield, and McKinley, from 1865 to 1901.

Presidents That Died in Office Images

In America, we don’t have royalty, but we treat Presidential elections with far more fanfare than most European nations treat their monarchies or their elections. Even though the physical swamp is cleaned up, there’s still something in the Potomac waters that intoxicates those inside the beltway with their presumed super-powers that we, the great unwashed, somehow cede to them every two to four years, or so it seems.

This is the time of year when we fret over what the new Congress and President might impose on us in their first sessions. Usually, this exercise is pointless this early, since it takes a long time for any major new tax bill to take shape – usually a year or two – so there is plenty of advance warning to make plans.

Those candidates who campaigned for House seats (meaning ALL of them) were lambasted for any foray into socialism, Green New Deals, or “defund the police,” so we’re not liable to hear much along those lines. Income and wealth inequality is a big deal, so I’ll cover that in a minute. But before Inauguration Day the big question is a Georgia runoff on January 5, bringing to mind the song by Hoagy Carmichael (born November 22, 1899), “Georgia on My Mind,” since that state will be on our minds until January.

But I’d like to honor the words of Johnny Mercer this time of year, since he was born November 18, 1909 in that now-disputed state of Georgia. In years past, I’ve listed 50 or more Mercer titles as a summary of our current economic condition, but now I’d like to list four choruses from one of his clever ditties in the 1959 film of the 1956 musical, Li’l Abner, “The Country’s in the Very Best of Hands.” Here’s a sampler:

Peter Palmer as Li’l Abner Image

(check it out on YouTube)

The Country’s in the Very Best of Hands!

The Treasury says the national debt Is climbing to the sky
And government expenditures have never been so high
It makes a fellow get a gleam of pride within his eye,
To see how our economy expands.
The country’s in the very best of hands

The building boom, they say, is getting bigger every day
And when I asked a feller, “How could everybody pay?”
He comes up with an answer that made everything okay
“Supplies are getting greater than demands”
The country’s in the very best of hands

Don’t you believe them Congressmen and senators are dumb
When they run into problems that is tough to overcome
They just declares a thing they calls a “moratorium”
The upper and the lower house disbands
The country’s in the very best of hands

The money that they taxes us, that’s known as revenue
They compound up collaterals, subtracts the residue
Don’t worry about the principal and interest it accrues
They’re shipping all that stuff to foreign lands
The country’s in the very best of hands

–Lyrics by Johnny Mercer, from “Li’l Abner” (1956)

OK, enough fun. Let’s get down to some compounded collateral, subtracting the residue, and see what interest we can accrue in the great campaign promise of making everyone better off through DC magic.

The Roadmap to a Wider Distribution of Household Wealth – Especially Stocks

Since 2019, Federal Reserve researchers have been publishing a large new database of quarterly estimates of wealth distribution of U.S. households since 1989. The data can break down the distribution of wealth by income percentiles, education, age, or race. The latest data are complete through the second quarter of 2020, when stocks and many households were depressed, but the total market value of equities held in the U.S that quarter was $52 trillion, of which the largest was held by the household sector ($19.5 trillion, or 37.6%), followed by mutual funds and exchange-traded funds (ETFs) (at $14.5 trillion, or 27.8%), or by the rest of the world ($8.2 trillion, 15.8%), and institutional investors ($7.0 trillion, 13.4%, see chart).

Corporate Equities Directly Held at Market Value Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In addition to their $19.5 trillion, households and nonprofits indirectly held $12.4 trillion (23.8%) of the fund and ETF sector, bringing their direct and indirect holdings of equities to $31.9 trillion, or 61.4% of all equities, and this has been stable around 65% since the early 1980s. The big question, of course, is which households? Just the rich? The Fed’s data show that the top 1% own $14.1 trillion, or 52.4%, the next 9% (90%-99%) own $9.5 trillion, or 35.8%. The next 40% (ranked 50%-90%) own $3.0 trillion, or 11.2%, and the bottom 50% control just $0.2 trillion, or 0.6%. That sounds dismal, but the bottom 50% never owned more than 1.6% of this asset category. The 90%-99% group has held a fairly steady share around 35% since the early 1990s. The top 1% has ranged between a low of 40.2% and a high of 52.8%.

Equities and Mutual Fund Shares Held by Households Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

So, the widespread view that the top 1% own a disproportionate share of stock holdings is true, but their share is closer to 50% of the total held by households than the politically charged share of 90% or more.

What’s the road map to more equality? Education is a start, since college-educated Americans held 82.9% of equities and mutual fund shares during Q2-2020 vs. just 60.2% in 1995. Household heads who had some college owned 9.9%, just high school was 6.3%, and no high school owned only 0.8% of stocks.

After education, the next key is to either start a business or have and keep a job that allows 401 (k) stock accumulation, or to save and invest. This requires empowerment of entrepreneurs and opening up the economy rather than a forceful transfer of wealth, which tends to kill the geese that lay the golden eggs by shutting down the job creators or pushing taxable capital offshore or into hibernation. Clear, Congress?

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
It Looks Like Another COVID Shutdown is Coming

Sector Spotlight by Jason Bodner
Should You Buy Into the Value/Growth Rotation?

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Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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