Commentary By Ron Beasley
Dow Exceeds 10,000 as Banks Turn From Drag to Drivers
The Dow Jones Industrial Average�s rally above 10,000 erases about half the damage done since the gauge soared to a record two years ago.
Led by financial companies, the Dow climbed 3,454.53 points since falling to a 12-year low on March 9 as investors speculated $11.6 trillion in government stimulus will end the recession. Intel Corp.�s sales forecast and earnings from JPMorgan Chase & Co. pushed the measure up 144.80 points, or 1.5 percent, to 10,015.86 today. It peaked earlier at 10,027.73.
More gains may depend on meeting profit estimates that call for per-share earnings among Dow companies to rise 22 percent in 2010 and 18 percent in 2011, according to data compiled by Bloomberg. The Dow, which first reached 10,000 more than a decade ago, remains 29 percent below its Oct. 7, 2007, all-time high even after the biggest two-quarter advance since 1987.
So is this important - is it meaningful? I will return to this two year old post:
Wall Street Does Not Equal the Economy
We have constantly been told that the American economy is strong. An increasing number of Americans know this just isn't so. The problem is that Wall Street has come to equal the economy in the minds of policy makers. For a majority of Americans this is simply not the case. In fact Wall Street has become part of the problem. The once noble purpose of Wall Street has been replaced by something that more closely resembles a Ponzi Scheme. The value of stocks seems to have little or no relation to the economy that most Americans experience. If you notice "stimulus" plans are usually designed to restore confidence - keep stock prices up. Once again the Federal Reserve is lowering the interest rates to prop stocks up. The last time this was done it resulted in a a sub Ponzi Scheme - the housing bubble which did what it was intended to do, run up the market. Of course like all ponzi schemes it couldn't last for ever and didn't.
Another thing that has driven up corporate profits and stock prices is also unsustainable - outsourcing the US economy. The US economy became the power house that it did during the 50s and 60s. The reason that occurred was a strong middle class which translated to customers with disposable income. Yes, the consumer has been spending but not with earned income but through debt which can't be sustained. The inevitable consequence will be a big crash - maybe this is it maybe not but it will come. All Ponzi Schemes eventually come crashing down.
Wall Street does not represent the "realities" of the economy. Companies will do what is necessary to drive up stock prices in the short term in part because the salaries of the executives are tied to the stock price. These short term actions are frequently bad for both the company and the economy in the long term which is one of the reasons we are in this mess now.. Government intervention all too often is also about the health of Wall Street rather than the health of the economy. What we are looking at here is a blackjack table and the table is fixed.
You speak wisely sir, this is not a recovery, it's a cover up. We've turned on the printing presses to paper over the depression and try and reinflate the bubble that would have rightly popped.
ReplyDeleteInstead of debt relief and asset revaluation, we've puffed up the balance sheets of the Wall Street crooks with funny-money.
What makes this message impossible to get out, is the unholy dance going on between corporate media and the banksters. They both have different motivations, but are on the same page. The banksters want to keep the stock market bubble they're blowing up for themselves alive. The media wants to make Barack Obama look good at all costs. Thus companies can have declining sales, and yet they can gin up "better than expected" profits through layoffs, and the media cheers it on.
Both part of the same lie machine, one for greed the other for ideology, but both working together to hoodwink the public.
The "plan" whether conscious or not, is to turn America into a Thailand style economy. There's the central business districts and the outlying areas. As demand picks up in the CBD's cheap labour is sucked in from the provinces and dispensed with again when there's lag. All indicators are simply bent to measure these CBD's as the vast proportion of the economy while the masses are left squatting in the countryside awaiting a chance to be called in. Anyone talented or good looking enough has a chance to flow into the pipeline of labour servicing the city machine allowing the aristocracy ruling the concrete kingdoms to claim their society is a true meritocracy.
ReplyDeleteSometimes I feel like everybody treats the market as such an abstract impersonal concept� and it is in a sense. It represents the supply and demand of money free for investing I suppose. But what about the pure heart of it - at the core of the stock market isn�t it just someone giving someone else money to do something with it in return for a portion of the hoped for profit?
ReplyDelete