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$1 trillion.
That’s how much Congress and President Trump plan to spend on a bailout.
It’s designed to prop up the American economy during the unprecedented coronavirus shock.
Plus, the government has already set aside $3 billion to fund a new coronavirus vaccine.
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President Trump’s team is working with Congress to get a deal done on a bailout plan.
The U.S. Senate just passed its $1 trillion bill for the bailout.
So, what’s inside the bill?
First, the bill includes $500 billion for businesses. This is being done with $200 billion in loans to the airlines and other distressed sectors of the economy. . . plus, $300 billion in loans to small businesses.
This is designed to assure that airlines, cruise companies and others don’t go bankrupt. The goal is also to assure that smaller companies benefit and are able to stay afloat in the coming weeks.
Second, the bill includes $500 billion for regular Americans. The government will send a $1,200 check to most American adults (or $2,400 for a married couple). Families with kids will get an extra $500 per child. For wealthy Americans the payments scale down all the way to zero – based upon income.
Initial checks are expected to mail within two weeks. And a second payment of the same size would be planned in six weeks.
Now, most Americans will benefit from an extra $2,400 or $4,800 over the next six weeks. There’s no doubt about that.
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Yet is it enough to save the economy? I’m doubtful . . .
Consumption represents approximately 70% of the U.S. economy. And that equals about $14 trillion per year – or $1.1 trillion per month.
Therefore, $500 billion paid directly to Americans translates into approximately 15 days of consumption.
The big issue is that the economy is going to take a huge hit. For example, almost everything is shut down in California and Pennsylvania. New York City followed suit today.
I’d expect that every state is completely shut down within the next seven days.
This means there isn’t much economic activity. No going out to eat. No haircuts. No theaters or sporting events. Nothing. Everyone is at home.
The only winners are Amazon (NASDAQ: AMZN), streaming video companies like Netflix (NASDAQ: NFLX), and other online and e-commerce companies.
Don’t get me wrong . . .
$1,200 for each American is a good start.
Yet most folks won’t go out and spend the money unless they need to. Lots of people are scared – and they’ll simply put the cash in the bank.
This $1 trillion bailout is a starting point. And just like the Great Recession in 2008 – 2009 – I’d expect more bailouts coming in the next few weeks.
$1 trillion simply isn’t enough to solve the economy blow from the coronavirus.
Bailouts are great. Yet what we really need is a medical solution to this health crisis. And that’s why the ONLY stocks I’m buying are these three little-known biotechs.
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Yours in Health & Wealth.
Ian Wyatt