Investing In The Social Safety Net

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What is the social safety net? Quite simply put, it's all of that "free" money that's out there that the government hands out. Social security and disability checks, food stamps, unemployment, and you can probably also lump government pensions in this category as well. I put the word free in quotes to at least acknowlege that a social security check is technically earned, and a government pension is mostly earned. My thoughts on how much of a government pension is earned, for me, depends on what kind of a job you had. Obviously I put more emphasis on the pensions of police and firefighters, military, and law enforcement/intelligence agencies of government. Where does the money go? A lot of this money tends to go to five primary places. Walmart, Dollar General, Family Dollar, The Dollar Tree, and places like Aldi stores. In the Aldi category one can probably include that one, as well as stores like Lidl and Ruler Foods. These three stores all operate pretty similar to one another. It's basically smaller stores, food at discounted prices, where you bag your own groceries and have to put a quarter in your cart to get it. Why is it a good investment? Because people spend unearned income differently than they spend earned income. And they also spend guaranteed income differently than they spend income that is less certain. Like a paycheck. Without sounding pejorative, it is usually pretty easy to spot people in a grocery store who are buying their food with food stamps. Their shopping carts are always fuller than everyone else's. Again, this is not meant to be a jab at anyone. It is simply a fact that people who are spending unearned income will be far less discretionary about what they spend. And it's not just them. People with other guaranteed sources of renewable or guaranteed future income will be less discretionary as well. It is simple psychology. If you know each and every month you are guaranteed to get more money, and that money is potentially an endless future source no matter what you do, you are more likely to decide to spend more money knowing you can possibly recoup it at some point in the future. Unlike a paycheck, which is not guaranteed. Not knowing, month to month, if you will always have the paycheck changes the way you think about spending in the moment. Someone spending a paycheck will be far more discretionary with their spending than someone spending a guaranteed benefit. There is one other element here to consider. Benefits recipients are not likely to be savers. Allow me to expand on this just a little bit. These recipients of benefits are interested in saving money. Just not putting it away for a rainy day. This is important in the idea of investing in the social safety net. They want to stretch their dollars. And so, the most obvious places to do that are discount retailers and food stores. The five places I mentioned earlier in this post are the collectors of the benefits. Walmart has been the most genius in their approach to collecting them of all of them. It's essentially a one stop shop, and their prices are pretty good. Where else can you buy your underwear, a new computer, a big screen TV, and a pack of chicken? And to top it off, Walmart is also diving in deep into financial services. An area that is majorly underserved when it comes to many of these recipients of benefits. For example, statistically, most people who use food stamps also use money orders to pay most of their bills and do not have a checking account. Walmart is tapping into that market. The investment. Stores like Walmart, Dollar General, and Dollar Tree (which also owns Family Dollar) are all publicly traded companies. And over the years, in good times and in bad times, these companies have largely done consistently well. In fact, even Dollar Tree was one of the hottest stocks to own during the Great Recession. It has done well through the pandemic as well. Why? Because when it comes to the social safety net, there is an endless flow of money that comes from it. The government will always maintain it in some way or another. And there is no unwillingness on the part of the recipients to spend all of it. Granted, not all of the money will be spent in these five places. But there is a determinable percentage of the total pool of money from all sources of social welfare programs that will be spent in these five places. And so it becomes pretty clear to understand that if one wants to "cash-in" on the social safety net, these are some of the best places to plunk down some cash and enjoy a sustainable return. Unlike these guaranteed benefits, these investments are not equally guaranteed. But they are a solid bet, at least in the near term, that this is where the bulk majority of money from these benefits are ultimately going to wind up. Like my cart observance to determine who is using food stamps to buy their groceries, one can observe parking lots at the beginning of the month to determine where the social safety nets are being spent.