About That $38-Million Ferrari…

The Other Side of the Ferrari StoryA 1962 Ferrari 250 GTO Berlinetta has set a new record selling for $38.1 million at an auction in Pebble Beach, California. News of the sale was all over the Internet and made it into major newspapers like The New York Times, The Wall Street Journal, and the Los Angeles Times.

But it’s not just old, rare cars that are selling. The high-end luxury car market is also booming. For example, Maserati sold 6,573 cars this past July, compared to only 1,536 cars a year ago. (Source: Motor Intelligence web site, last accessed September 2, 2014.)

The markets for high-end real estate and high-end fashion goods are hot in the U.S. economy, too.

The mainstream is looking at the boom in various luxury markets and calling it economic growth. Truth be told, only a very small fraction of Americans can afford to live a lavish lifestyle and buy expensive cars, homes, and other gadgets.

The other side of the story—the story of the 99%-plus—usually goes untold.

What follows below is a picture (I personally took) of a sign posted in every grocery store I went into in a prominent town very close to New York City. The picture not only shows how the average American is struggling, but it also puts a big dent in the theory of economic growth in the U.S. economy.

We Accept WIC Check and Food Stamp
Americans are using food stamps and other government assistance programs like never before. The truth is that if the U.S. economy was witnessing economic growth, we wouldn’t have 46.25 million Americans and 22.5 million households using food stamps in the U.S. economy.

Not too long ago, in Profit Confidential, I reported on a survey that showed that Americans are so strapped for cash that they’d be hard-pressed to come up with $400.00 if they needed it for an emergency. (See “Having Trouble Coming Up With Four Hundred Bucks.”)

Obviously, I find it’s no surprise consumer spending is declining. In July, personal consumption in the U.S. economy declined by 0.1%—the first decline since January and the second for the year. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 2, 2014.)

Looking at all this, I don’t buy into the notion that there’s economic growth in the U.S. economy. In fact, we are far from it. The monetary policies the Federal Reserve implemented to help us get out of the Great Recession have principally helped the big banks and the rich.

I’ll believe there’s economic growth in the U.S. economy when the average American Joe starts to spend—and not just on essential goods, but on discretionary items, too.

When that happens, I will start to buy stocks again. Until then, I continue to see stocks treading in bubble territory. When a stock market rises on the back of very weak fundamentals and declining trading volume, it usually never ends well.