The Stock Bubble
March 6, 2013 by Bob Livingston
The Dow Jones industrial average topped its all-time high yesterday, zipping past the previous high of 14,198.10 it hit on Oct. 9, 2007.
On the backs of money debasement, $7 trillion in additional debt and mainstream media propaganda, helicopter Ben Bernanke has created the illusion of a prosperous economy. It’s a bubble that will soon burst. When it does, it will be ugly.
Even Bernanke knows this. Although he seems committed to the Fed’s bond-buying stimulus right now (aka QE3), the Fed has begun formulating PR strategy for the end of the $85 billion in monthly money printing and the concomitant crash.
Despite Wall Street’s irrational exuberance, 59 percent of Americans say the United States is in a recession, and “Americans across the board think the economic outlook is grim,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence and partner of Investor’s Business Daily. The IBD/TIPP Economic Optimism Index plunged 5.1 points in March to 42.2, its lowest point since December 2011. The Federal economic policies confidence gauge fell to a 15-month low. January personal income tumbled 3.6 percent, the worst monthly drop in 20 years. Retailers are about to close thousands of stores. And, adjusted for inflation, the stock market is nowhere near historic highs.
Leave it to Zero Hedge to put it all in perspective. The last time the DJIA was here:
- Dow Jones Industrial Average: Then 14,164.5; Now 14,164.5
- Regular Gas Price: Then $2.75; Now $3.73
- GDP Growth: Then +2.5 percent; Now +1.6 percent
- Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
- Americans On Food Stamps: Then 26.9 million; Now 47.69 million
- Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
- U.S. Debt as a Percentage of GDP: Then ~38 percent; Now 74.2 percent
- U.S. Deficit (LTM): Then $97 billion; Now $975.6 billion
- Total U.S. Debt Outstanding: Then $9.008 trillion; Now $16.43 trillion
- US Household Debt: Then $13.5 trillion; Now 12.87 trillion
- Labor Force Participation Rate: Then 65.8 percent; Now 63.6 percent
- Consumer Confidence: Then 99.5; Now 69.6
- S&P Rating of the US: Then AAA; Now AA+
- VIX: Then 17.5 percent; Now 14 percent
- 10 Year Treasury Yield: Then 4.64 percent; Now 1.89 percent
- EURUSD: Then 1.4145; Now 1.3050
- Gold: Then $748; Now $1583
- NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares
Helicopter Ben can keep this charade up a while longer, but there will be a reckoning.