Posted by
rycK on Thursday, June 11, 2009 4:24:12 PM
A Mystery: The Stock
Market Keeps Rising on a Weak Economy. Possible Reasons Explained.
The Dow
continues to surge despite some major problems. This may be a ‘bear rally’ of
the sort seen some seven times during the Great Depression. A month ago several of the international
experts, notably Ambrose Evans-Prichard said things like this:
“Bear market rallies can be explosive. Japan had four violent spikes during its Lost Decade (33 percent, 55
percent, 44 percent, and 79 percent). Wall Street had seven during the Great Depression,
lasting 40 days on average. The spring of 1931 was a corker.”--
Ambrose Evans-Pritchard:
Enjoy the rally but expect sucker punch
Gross US wealth is declining as home
prices fall and net
worth fell 1.33 trillion dollars in this second quarter of 2009. We have
probably lost 20 trillion from the 2007 high.
There are other explanations and some
are not so good for growth:
[1]
Corporations have been forced to go ‘mean and lean’ and have cut frills and
unnecessary expenses. This means that they may be much more efficient than in
2007-2008. This suggests higher profits with fewer people hence the definition
of efficiency.
[2] Loses
on loans and other assets may have lowered the net corporate tax rate and some
loses may be carried over for several years to offset earnings in 2010 and
beyond.
[3]
Inventories may be burning out to maximize cash flow for 2009 at the expense of
next year.
[4] The
massive infusions of printed federal money into the banks has boosted their ‘profits’ if not their share prices as they
can borrow at zero percent and loan at 5 for the full spread.
[5]
Mortgage rates and oil prices are rising; these are counter indicators for
growth and profits. Gas prices are soaring. The demand is probably from India and Asia.
[6] “Retail
sales climbed 0.5% in May” and are not so strong. Also:
"Basically the consumer is still dead in the
water," he said. "We're not going to see a rise in consumer spending
in the second quarter like we did in the first. Household balance sheets are a disaster.”--
Dow's up for 2009 Blue-chip
measure moves into positive territory, other stocks gain after higher retail
sales and a larger-than-expected dip in jobless claims. By Alexandra Twin,
CNNMoney.com senior writer
Something stinks here. I think this is just some
bursting bubble in the ‘confidence’
program by president Obama to give us the impression that there is some
recovery unfolding. There are no good indicators here that would justify such a
market surge. I agree with Cody Willard that fascism has given some kind of
boost to the government programs and that there is some kind of delirium on
Wall Street. Taxes will soar, cap and trade costs will wreck industry, and
socialized medicine [aka single payer] will cost hundreds of billions due to
government waste and inefficiency.
I am
holding tight and waiting for the next downturn. I am also watching gold and
bond sales. Something is about to go sour. Our currency is in jeopardy with all this
spending. I may go short for the first time since the 60s and I think the
market may sink to 6,000 or lower.
This phony
‘stimulus’ may be feeding a false stimulus to the markets and are
debt-driven—the kind of thing that sank our economy in Nov 2007.
rycK
Comments:
ryckki@gmail.com
Ambrose Evans-Pritchard: Enjoy the
rally but expect sucker punch
Submitted
by cpowell on Sun, 2009-05-10 09:17. Section: Daily Dispatches. By
Ambrose Evans-Pritchard The Telegraph, London Sunday,
May 10, 2009
http://www.gata.org/node/7414