Shiny, happy Wall Street

Mike in Redwood City,

A 5% drop in GDP results in a 50% drop in the stock market because an 8% drop in Starbuck’s sales means a 77% drop in profits.

Obviously you buy and sell stock but have never actually run a company.

The government, meaning the taxpayer, has pumped so much money that was borrowed or created out of thin air into the economy that things would have to look upbeat. When the inflated chickens come home to roost and the creditors demand repayment (I doubt if China will consider turning the loan into a gift), maybe the real economy will be strong enough to weather the storm and maybe it won’t. Things were not as bad as the gloom and doom scenarios when Bush was President and not as glowing now that Obama is President. It is all political misdirection. This is just another example of Greenspan’s unjustified exuberance; let us hope that the false euphoria does not divert us from making the real reforms which are necessary. If you remember the fable of the grasshopper and the ant, Wall Street is made up of grasshoppers and the majority of the American populace appears to want to be grasshoppers too. Soon these worthless parasites will hopefully freeze.

It sure seems like the economy has gotten worse since the end of 2008, but it will stabilize soon and then start to grow again.

Now, let’s be realistic. If GDP falls 5% this year from last year (which it probably won’t), how does this justify a >50% fall in the stock markets ?

So, there’s your answer: business panicked, stock markets oversold wildly, and now stocks are starting to recover some of the oversoldness.

Meanwhile, government is growing, and consumer is hanging tough (possibly growing, too). So, we need the business sector to wake up and start spending and investing once again.

And, kill off all of the bank bailouts.

The economy is getting worse, but you cannot tell it by the perversion that is taking place on Wall St., even if the GDP had come in down 7 or 8 per cent, the market would still have gone up simply because it’s being manipulated by the FED and all the TARP money given out to the banks, along with the alphabet soup programs. How will the economy get better without jobs? How will the economy get better when we have a debased, worthless currency? No jobs, No recovery, No improving economy, it’s that simple!

It is obvious that from last year’s 4th quarter to this year’s 1st quarter has in fact shown a very slight improvement. But the markets do not dictate the overall economy. The truth is the economy is still very much in bad shape and will take many months to get significantly better. So the real question is then… how long will this recent rally on Wall Street last before it goes back down again?

It will be better when I get some work. Three months looking a job market is bleak, bleak, bleak… On a larger scale, things cannot get worse indefinitely or civilization will come to an end. I don’t expect that. But ‘falling more slowly’ does not mean a rebound must occur soon. Economics is not Physics.

I cannot see much difference with the consumer. Stores are not crowded at all in this area. Other business seems slow too. Prices for most goods and services are mildly discounted.

What is scarry is the nationalization trends: bailouts, spending off the chart, government ownership, cap and trade (yuck) — that cannot bode well. Insanity is trying socialism over and over and expection a different result.

Wait until the effects of the commercial real estate market implosion that is currently underway hits these big bank balance sheets. CitiCorp and Bank of America will be confiscated by the government to join their brethern Government Motors and Chrysler. Get ready for a whole new round of bank bailout money being thrown at these people. Well one way to look at it is that once the government owns them they can continue the process of promoting refinancing of mortgages to people that cannot afford their mortages. I am simply amazed at the constant media promotional program that is turning a hideous GDP report into a revelation of future economic prosperity. If you believe that the economy is getting better my guess you also believe that the UAW and the Federal Government have the ability to manage a Chrysler and GM turn around. They will both still be bankrupt in a couple years. Especially after the UAW has to bargin with itself at Chrylser during labor negotiations. Let’s figure out how that is going to work. Let’s redistribute the wealth from management to the workers. It won’t matter when your insolvent.

Ever feel like you are part of an operation, like a moneyand constitutionremovalotomy. And all the media can ask is: does it hurt yet?

BOY WHAT HAPPINESS DOTH SPRING BRING…I GET A KICK OUT OF THE ANALYSTS WHO ARE ALREADY SEEING,”GREEN SHOOTS” AND THE RECESSSION IS IN THE,”REARVIEW MIRROR”. WELL I AM CURRENTLY BUILDING A HOUSE IN MASS. THE LINE OF PEOPLE CARPENTERS,PLUMMERS,MASONS ETC. THAT STOP BY ON A DAILY BASIS LOOKING FOR WORK IS INCREASING NOT LESSENING. THIS WOULD SEEM TO INDICATE THESE TRADESMAN ARE NOT WORKING EVEN THOUGH SPRING IS THEIR BUSIEST TIME. HMMM. CONSUMER SPENDING INCREASED…WELL IT IS TAX REFUND SEASON BUT THAT WILL SOON BE OVER. I’M SURE THE PASSENGERS ON THE TITANIC WERE REASSURED, HEY THE SHIP IS ONLY PARTLY FULL OF WATER.. NOT AS BAD AS WE EXPECTED!! CHEER UP.

To your point, the economy is not falling quite as fast as previously, so while things are getting worse, they are now just falling as opposed to plunging. Is that reason enough to rejoice and put money to work in the market? For some people perhaps.

Clearly the bigger forces at work here helping the market to maintain itself and even rise are the facts that previously un-imaginable amounts of liquidity have been pumped into the economy. Unprecented amounts of money that can’t do anything but go to work in the market because of the second driver of the recent frothiness – that is the fact that interest rates as determined by the Fed are virtually at zero. So where else would you put the money? The Fed has closed off all other avenues screwing over all of the older folks and the savers who now reap next to nothing for being responsible all these years.

Whatever happened to market forces and let the chips fall where they may? It can of course be painful, but basically that is how economics have worked for untold years. But natural forces can not be left to work their magic in the current environment – that would be too painful and we are just not up to any pain, even if it would be for our own good.

So yeah, the market is up, but not because the economy is doing that much better now. It is more the case that we have been injecting some silicone into this so it looks better anyway even if it is unnatural!

Laughing my assets off!