Close to a majority of young investors who received money from the US government to withstand the COVID-19 pandemic used some of those funds to buy stocks and cryptocurrencies, according to a CNBC/Momentive survey.
49% of investors 18-34 years-old turned to stocks and digital assets in an effort to maximize their slice of the billions of dollars in stimulus money sent to most Americans by the Biden and Trump administrations after the virus began to sweep through the country in early 2020.
15% of young investors put money into individual stocks and 11% purchased cryptocurrency, according to the survey published Tuesday. Also, 9% invested in mutual funds and 8% purchased exchange-traded funds. Momentive surveyed 5,523 adults from August 4-9, and of those, 45% are investors.
More than 25% of total survey respondents said they began investing within the last 18 months, and 73% started in 2019 or earlier.
US stocks so far this year have climbed to record highs, aided by a growing number of individuals who have used so-called ‘stimmy’ cash to buy into dips or pullbacks in the market as prices become less expensive. Meanwhile, the cryptocurrency market this year has swelled to more than $2 trillion in valuation, fronted by gains for bitcoin, ether and other digital currencies.
The survey found that one in 10 people in the US invest in cryptocurrencies and 60% do so because of the potential for long-term growth.
House Speaker Nancy Pelosi slammed Senate Minority Leader Mitch McConnell for touting the benefits of the stimulus law for his home state of Kentucky. The $1.9 trillion coronavirus relief law cleared Congress in March without any Republican support.
“Vote no and take the dough,” Pelosi wrote on Twitter.
At a press conference on Tuesday, McConnell swung between noting his opposition to the federal rescue package and crediting it with providing substantial financial relief for Kentucky.
“Not a single member of my party voted for it. So you’re going to get a lot more money,” McConnell said. “I didn’t vote for it, but you’re going to get a lot more money. Cities and counties in Kentucky will get close to $700-$800 million.”
The Kentucky Republican said the state was projected to get $4 billion as a result of the stimulus law. “So my advice to members of the legislature and other local officials: Spend it wisely because hopefully this windfall doesn’t come along again,” McConnell said.
Republicans were staunchly opposed to Biden’s stimulus law, which contained $1,400 direct payments, a renewal of federal unemployment benefits, and aid to state and local governments. They argued it was too large and costly after lawmakers had approved a $900 billion federal rescue package late in 2020. Not a single Republican in Congress voted for it.
However, at least a dozen congressional Republicans have since touted parts of the law, such as small business aid, even though they didn’t support the law’s passage. Biden rebuked the GOP earlier this year for “bragging” about the law, saying, “some people have no shame.”
Also on Tuesday, McConnell pledged a bruising political brawl over Democratic efforts to bypass Republicans to implement their infrastructure spending plans. “This is not going to be done on a bipartisan basis,” he said. “This is going to be a hell of a fight over what this country ought to look like in the future and it’s going to unfold here in the next few weeks.”
New analysis suggests that relief payments included in Congress’s sweeping stimulus were highly effective at supporting Americans and easing various stresses through the pandemic.
The pandemic-era stimulus checks weren’t the first instance of the government issuing relief payments, but the amount of cash sent directly to Americans over the past year is unparalleled. Millions of Americans received $1,200 payments from the March 2020 CARES Act, another $600 check from President Donald Trump’s late-2020 package, and a $1,400 payment from Democrats’ March stimulus.
The payments were among the less-studied elements of the various relief plans, but a study by Patrick Cooney and H. Luke Shaefer at the University of Michigan found the checks were helpful in several ways. The researchers cited data from the Census Bureau’s Household Pulse survey.
For one, food shortages fell sharply after the December stimulus’s passage and again after the American Rescue Plan Act was approved in March. The share of Americans saying they sometimes or often lacked sufficient food fell to 8.7% by early May from a late-December high of 13.7%. For households with children, the share fell to 11.3% from 18.3%.
The second and third relief payments also padded against financial concerns. Roughly 10% of Americans said it was “very difficult” to pay for usual household expenses in late May. That’s down from 17.8% in December 2020. The proportion fell to 13.5% from 23.1% for respondents with children.
Households earning less than $25,000 saw the largest drop in financial instability over the period, but those earning less than $49,000 also saw notable declines.
Recipients’ mental health also improved markedly in the weeks after checks were sent out. The share of Americans saying they felt anxious for several or more days in a week fell to 52.8% last month from 68.6% in late December.
Similarly, the proportion of respondents saying they felt symptoms of depression for several or more days of the week fell to 46% from late-2020 highs of 59.4%.
To be sure, sentiments broadly improved through the spring as the country emerged from the worst phase of the pandemic. Vaccination led daily COVID-19 case counts to plummet, and the easing of lockdown measures brought back a sense of normalcy after a dire winter.
Yet when considered alongside data on food shortages and financial insecurity, the checks seemingly made significant positive impacts on Americans’ lives. Similarly, in the period between March 2020 and December 2020, gauges of economic hardship worsened amid soaring COVID-19 case counts and the gradual exhaustion of CARES Act relief.
The stimulus checks’ broad-based, rapid, and cash-based nature made them far more effective forms of economic support during the pandemic, the researchers said. The checks supported needs ranging from food scarcity to housing payments, and widespread eligibility matched the widespread fallout felt throughout the country.
“The success of this approach is worth learning from, and building off of, in the months and years ahead,” the team added.
Since the start of the pandemic, the government has distributed three rounds of stimulus checks to Americans in order to help prompt economic and financial recovery. But a ring of Venezuelans might have prevented hundreds of people from receiving those checks.
The Miami Herald reported on Wednesday that Venezuelans living in South Florida and Mexico have stolen over $800,000 in stimulus checks since the start of the pandemic, according to federal authorities. The feds have so far charged Jesus Felipe Linares Andrade for conspiring to steal government money, along with identity theft, and prosecutors in South Florida said Linares could have as many as four other “co-conspirators.”
Linares was arrested in May and pleaded not guilty after being caught in an undercover FBI operation in which he, and his conspirators, stole checks in South Florida and Mexico and created fake IDs to correspond with the names of actual US taxpayers.
According to the Herald, an FBI informant met with one of the conspirators in January to discuss cashing about 30 stimulus checks totaling to $36,000. Then, in April, Linares met with two FBI informants to make arrangements to pick up a package with 416 more stimulus checks worth about $249,000.
The meetings continued through April and eventually totaled to over $800,000 in stolen stimulus payments.
“During the meeting [in April], Linares placed an envelope in the vehicle containing over $150,000 in stolen U.S. Treasury checks and over 30 identification documents,” the affidavit wrote. “The identification documents consisted of copies of driver’s licenses, including Florida driver’s licenses. Some of the names on the driver’s license matched the names on the checks.”
Linares is being held without bond.
Although President Joe Biden has not yet announced whether more stimulus checks are en route, studies have shown that the benefits of stimulus checks are significant, with two more checks having the ability to lift an additional 12 million Americans out of poverty.
And a growing number of Democrats are pushing for recurring stimulus payments to sustain economic recovery from the pandemic.
“The pandemic has served as a stark reminder that families and workers need certainty in a crisis,” House Democrats wrote in a letter. “They deserve to know they can put food on the table and keep a roof over their heads. They should not be at the mercy of constantly shifting legislative timelines and ad hoc solutions.”
As a growing number of Democrats are pushing for recurring stimulus checks beyond the three that Americans have already received, the Boston Herald found 1.2 million people still haven’t spent their first $1,200 check, from all the way back in March 2020.
Under the CARES Act passed that month, most Americans received a $1,200 stimulus check to help ease the financial pain of the pandemic. The Herald reported on Sunday that 1.2 million people have yet to spend those checks, citing records obtained from the Internal Revenue Service (IRS). The records show that California leads the country with 123,265 unspent stimulus checks, followed by Florida with 92,018 unspent checks.
The IRS told the Herald that the figures reflect “the number of people who either refused to accept, paid back or not cashed the stimulus checks they received from the IRS as a result of the CARES Act that was signed into law on March 27, 2020” by President Donald Trump.
Unspent COVID-19 relief money supports Republican lawmakers’ arguments that more money should not be spent on things like infrastructure until money already allocated from pandemic relief bills gets put to use. For example, House Republican Whip Steve Scalise cited in February the Committee for a Responsible Federal Budget’s COVID Money Tracker that found $1 trillion of pandemic relief funds are unspent.
“There’s over a trillion dollars of money unspent from previous relief bills that were bipartisan,” Scalise said Feb. 21 on ABC’s This Week.
However, the CRFB noted that figuring out how much money is actually unspent is complicated because much of it is already allocated and scheduled to be spent.
More recently, a growing number of GOP-led states have moved to cut off $300 weekly unemployment benefits early, and Sen. Shelley Moore Capito has suggested using those unspent funds to fund infrastructure.
“I think there’s all kinds of different ways that we’re looking at. Certainly repurposing some of those covid dollars,” she told Bloomberg. “I’ve been looking at those 21 states that are no longer paying the enhanced unemployment – why don’t we repurpose those dollars to help those folks coming off unemployment get work in an infrastructure plan.” The White House has dismissed such suggestions.
Even though 1.2 million stimulus checks remain uncashed, a growing number of Democrats are pushing for checks to be recurring, along with extended unemployment benefits, to sustain economic recovery. A recent report from the Economic Security Project found that sending two more rounds of stimulus checks could keep 12 million more Americans out of poverty, which is why in March, 21 senators wrote a letter to Biden advocating for recurring direct payments. Last week, seven House Democrats wrote a similar letter pushing for the same thing.
“The pandemic has served as a stark reminder that families and workers need certainty in a crisis,” the House Democrats wrote. “They deserve to know they can put food on the table and keep a roof over their heads. They should not be at the mercy of constantly shifting legislative timelines and ad hoc solutions.”
Michael Burry warned the post-pandemic reopening could cause inflation to spike as early as April last year – mere weeks after the first lockdowns in the US. His prediction was proven right this week by data showing consumer prices jumped 4.2% year-on-year last month, the sharpest increase in 11 years.
“When we start working and playing again, inflation may be in store,” the investor told Bloomberg for a story published on April 7 last year.
Burry is best known for anticipating the collapse of the US housing market in the mid-2000s, and making a billion-dollar bet on that outcome. That episode of his career was immortalized in the book and movie “The Big Short.” He also helped lay the groundwork for the meme-stock frenzy earlier this year by investing in GameStop and pushing for changes at the retailer back in 2019.
The Scion Asset Management chief ramped up his inflation warnings in February of this year. He cautioned that stimulus checks, the Federal Reserve’s continued pumping of liquidity into markets, and the reopening of large parts of the economy were likely to drive prices higher.
“Prepare for #inflation,” Burry tweeted on February 19. “#Inflation pressure building. The Fed is monetizing $80 billion of Treasury debt per month, and now comes $Trillions in stimulus/debt + reopening,” he tweeted four days later.
Burry highlighted America’s inflation woes in the 1970s, as well as Weimar Germany’s hyperinflation in the 1920s, as cautionary tales about the risks of soaring prices. He also flagged Warren Buffett’s description of inflation as a “tax on capital,” as it discourages companies from investing by reducing their real returns, and acts as an implicit tax on investors by eating into their purchasing power.
The Scion chief’s takeaway was that profitable companies shine during inflationary periods.
“Each $ of earnings today becomes important,” he tweeted on February 23. “Earnings 10 and 20 years from now, the corollary goes, may be worth substantially less tomorrow’s today.”
Burry didn’t only raise the alarm on inflation. He also warned the stock market was “dancing on a knife’s edge” in February, and called out Tesla, GameStop, bitcoin, and Robinhood as examples of dangerous speculation in markets.
Jeffrey Gundlach underlined the risks of excessive federal stimulus in a Yahoo Finance interview this week. He also warned sustained inflation could hammer stock prices, and suggested bitcoin’s recent slump might indicate that market speculation is on the decline.
The billionaire founder and CEO of DoubleLine Capital, whose nickname is the “bond king,” said multiple rounds of stimulus checks have distorted several parts of the economy. They have fueled the sharp rise in US house prices over the past year, he said, and discouraged some recipients from working because they’re “making more money sitting at home watching Netflix.”
“One of the dangers that we’ve opened the door to is these stimulus checks are starting to feel like they might not go away,” Gundlach added.
The DoubleLine boss was caught off-guard by inflation data this week that showed consumer prices jumped the most in 11 years last month. His firm’s models were predicting higher inflation in another month or two, and he still expects the peak to be in July, he said.
“If we keep going higher from there, then I think people are going to be seriously worried,” he continued, explaining that it would rule out a temporary increase in prices due to the economy reopening.
Moreover, sustained inflation could pressure the Federal Reserve into raising interest rates and pumping less liquidity into markets. “That’s gonna be problematic for the valuation of the stock market,” he said.
“Gamestop, all these things, a lot of people are just playing with this funny money,” he said. “They feel like they’re playing with the house’s money, so it actually does resemble a casino to them, psychologically.”
Gundlach, who was bullish on bitcoin last year, compared it to the pre-revenue tech startups that went public in the months before the dot-com crash. “Every era of really highly valued markets, after they’ve run a lot, has some sort of a poster child,” he said. “Here I think it’s really these cryptos.”
The investor suggested bitcoin’s recent correction might indicate the rampant speculation in markets has peaked and may now be easing. “Maybe it’s only temporary, but when you’re looking at a speculative fervor, I look for the poster child to roll over last,” he said.
The White House press secretary, Jen Psaki, on Friday defended a letter that President Joe Biden sent to tens of millions of Americans who received a third round of COVID-19 stimulus checks this spring.
The letter, mailed by the Internal Revenue Service and signed by the president, touts his $1.9 trillion American Rescue Plan, which was passed in March, and highlights key provisions of the bill, including $1,400 direct payments, funding for small businesses, and an expanded child tax credit.
“A key part of the American Rescue Plan is direct payments of $1,400 per person for most American households,” Biden wrote in the letter obtained by Insider. “This fulfills a promise I made to you, and will help get Americans through the crisis.”
The letter is “pretty standard” and was “not intended to make it about him,” Psaki told reporters during a press conference on Friday. “It’s about the American people.”
Psaki said the letter “goes out with physical checks.” But people who got the federal aid through direct deposit have also received the letter. The IRS said all recipients of the third payment will get the letter, which “should be kept with tax year 2021 records.”
Psaki’s comments come after some have criticized the letter as an act of self-promotion and compared Biden’s move to that of his predecessor, President Donald Trump, who sent a similar IRS letter to Americans about coronavirus stimulus checks enacted during his administration.
Biden’s letter appears identical in format to the one Trump sent last spring. Both letters were mailed by the IRS, displayed the White House letterhead, are signed by the president, and addressed to “My fellow American.”
But Biden did not include his signature directly on the stimulus checks, which Trump did – a decision that may have delayed their delivery to the public. “We didn’t have [Biden] sign the checks because we were concerned about any impact that would have on delaying them going out to the public,” Psaki reiterated on Friday.
At the time, Trump’s letter prompted criticism that he was politicizing the IRS for his benefit. Citizens for Responsibility and Ethics in Washington, a government watchdog group, called Trump’s letter “self-aggrandizing.”
The organization reacted negatively to Biden’s letter as well.
“This trend toward presidents sending self-serving signed letters at taxpayer expense is unfortunate regardless of who does it,” said Noah Bookbinder, CREW’s president. “I hope that President Biden will not learn the wrong lessons from his predecessor and continue this kind of tactic.”
Senate Minority Leader Mitch McConnell on Thursday faulted the Biden administration for approving stimulus benefits, and claimed they are hurting the nation’s economic recovery.
“We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” McConnell said from Kentucky. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”
He went on: “So we have a workforce shortage and we have raising inflation, both directly related to this recent bill that just passed.”
McConnell’s comments reflect longstanding GOP concerns about disincentivizing people from returning work as a result of issuing direct payments and federal unemployment benefits. Democrats approved a massive $1.9 trillion stimulus package in March, arguing many households needed immediate financial aid from the government.
No Republicans voted for the relief package. The unemployment rate has steadily fallen to 6%, and new claims have dropped for four weeks in a row.
But employers are growing alarmed over worker shortages, particularly those in the restaurant sector, while shortages of commodity goods are causing massive price increases in certain pockets of the economy. The trends caused the White House to defend its policies on Thursday. White House Deputy Press Secretary Karine Jean-Pierre said there was “little evidence” that enhanced unemployment insurance was enticing people away from work.
Some economists note that a key feature of a labor shortage – rising wages – is not in evidence, as businesses typically take that step to lure job-seekers from a scarce pool.
“When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market,” Heidi Shierholz, economist and director of policy at the left-leaning Economic Policy Institute, wrote on Twitter. “And right now, wages are not growing at a rapid pace.”
Federal Reserve Chairman Jerome Powell weighed in on the issue last week at a press conference. He said potential factors that could explain the shortage include a lack of childcare, lingering COVID-19 fears, and school closures.
“We don’t see wages moving up yet. And presumably we would see that in a really tight labor market,” Powell said. “And we may well start to see that.”
Following a 24-hour ultimatum from Democratic lawmakers, the Social Security Administration provided information to the Internal Revenue Service on Thursday that will help more Americans get stimulus payments.
Nearly 30 million Social Security and Supplemental Security income beneficiaries were kept waiting on stimulus payments because, House Democrats said, the SSA hadn’t provided the Internal Revenue Service with necessary payment files for them.
On Wednesday, the chair of the House Ways and Means Committee, Richard Neal, and the chair of the House Oversight Subcommittee, Bill Pascrell, Jr., sent a letter to the SSA requesting that information be sent over right away. “We are giving the trump-appointed heads of the Social Security Admin **24 Hours** to get off their backsides and stop delaying sending stimulus checks to 30,000,000 Americans,” Pascrell said on Twitter on Wednesday.
On Thursday, the SSA transferred the necessary files to the IRS, making it possible for the affected Americans to get the $1,400 stimulus checks that many others have already received.
“The delays imposed by Commissioner Saul defied congressional intent and imposed needless anxiety and pain on taxpayers,” the Democrats said in a statement on Thursday. “Now the IRS needs to do its job and get these overdue payments out to suffering Americans. Further delays will not be tolerated by this committee.”
Rep. John Larson of Connecticut and Rep. Danny Davis of Illinois had joined Neal and Pascrell in calling for action from the SSA and IRS.
Since President Joe Biden’s stimulus bill was signed into law, Americans across the country have encountered delays in receiving stimulus aid. Due to December and March stimulus changes, the IRS was behind in processing nearly 7 million tax returns, and customers of major online tax preparers, such as TurboTax and H&R Block, faced delays on the $10,200 tax break on unemployment benefits received during the pandemic.
As a result of the delays, along with calls from lawmakers, the IRS extended tax filing season to May 17, which Neal and Pascrell said would lift the “titanic strain” on taxpayers.
The Treasury Department, IRS, and Bureau of Fiscal Service announced on Wednesday that 127 million of the $1,400 stimulus checks have been sent out to date.