DEFYING GRAVITY

I had recently discussed the stock market and the rise of the indices.  My admonition that the market is not a reflection of economic health but the economic health of the wealthy is borne out by the facts. The stock market has been artificially buoyed by the Fed and this can be demonstrated.  The 50 days since the 23, March 2020 to June 3^rd the S & P 500 has performed better than it has since they kept records in 1952.  Why has the S & P gained 39.3%?  Has any of the news in that period been that great?  The Fed had predicted a 37% reduction in second quarter GDP, and currently has revised their estimate at over at 30%, as a reduction in GDP in the 2^nd quarter. That’s a $6.3 trillion dollar hit to the economy. One would assume that companies would at least suffer a 30% loss in revenues?  The Fed also estimated gain from that low to reduction of 15% for the 3^rd quarter.  If this happens, the recession Impeached Donald Trump has created, will be over. However, the total economic catastrophe continues.

What makes the stock level magical is that in a normal recession, when profits fall, stock prices normally follow. However, not this time.  The facts are that news has not been positive and the outlook is being painted with rose-colored glasses, being issued to all that would listen. 

This market must be reflective of economic perfection never before realized, as it has no logical rationale for its high, when you look at the pandemic, high unemployment with true levels hidden by this administration, standard metrics like price to earnings ratios (PE), unrest in all major cities.  Secondary economic damage forms a second wave of the virus, a widening of a trade war, or other self-inflecting wounds to the economy.  All this should be a warning that not all is as rosy as the administration would have you believe.  Could it be “there is no alternative” TINA?  Precious metals have not swing as wildly during this period, hovering around $1,600-1,800  an ounce.

The only justification for the high index prices are the ridiculously low interest rates given to corporations for borrowing at less than 1%, and the $4.5 trillion dollar infusion to selective companies.  All of these efforts are only temporary salves.  Even if the economy rebounds will the market skyrocket with social pain and agony and record unemployment?  If the Fed throws enough money at the market and proceeds with gambling, using your money, it will rise to new heights.  After all, the stock market is the whole economy?  At least that’s what Impeached Donald Trump thinks.

The market is amoral. It’s only concerned with profit and has no concern for human suffering.  Remember from Feb. 19^th through March 23^rd the S & P dropped 34%.  The only thing that turned the market was the Fed buying everything it could get its hands on, with a vast mixture of security purchases and emergency loans that gave the market access to the $4.5 Trillion.

Information is power.  Gyrations caused by the Fed doling out to selected companies, impacts the market, as seen by its record rise.  Is someone making billions on the Fed gambling with information?  When will the other shoe drop and have people realize it’s all smoke and mirrors?  Demonstrations will continue as a result of the misery index, youth out of school, high unemployment for minorities persisting as a result of service workers being the first to get a notice.

UNEMPLOYMENT RUSE UPDATE

The jobs report isn’t that rosy when you consider 1.4 million people, showing as employed, are restaurant workers being paid and some not working, but getting paid.  If restaurants come back at 25-50% capacity, will all the 1.4 million workers return? I think not.  I was missing a small value when trying to reconcile my evaluation with that of the BLS unemployment numbers yesterday.  My estimated 17.7 still did not reconcile with my estimate of a number closer to 19%.  This adjustment for restaurant workers would have the value reported at 13.3 by BLS, to be actually closer to 18% unemployment for May.  This makes me feel better now that I have been able to reconcile closer to most other economists’ predictions.  There are always attempts by economists, through rational thought, to reconcile predictions to hone their modeling.  Making economists are right more often than wrong, by proof.

So Friday, impeached president Trump puts out rosy, phony numbers on the employment and bogus near highs for the stock market and he paints a picture of being great, when the misery index (True unemployed counting all types and not sugar coating the numbers) is 27.7% of the people are truly suffering.

The 27.7% includes the 13.3% reported and then you add:

1. Individuals wanting a job and not looking (how many large employers are hiring for someone that has a specialty?)
2. Working part time during the pandemic. How many workers are only working part time?
3. And a “classification adjustment” of 3.1% known miscounted, but for optics not included by the administration and stated they would not go back in the future to adjust this number like they normally do.  Why not? It’s all optics.

The same unemployment index, which I call the misery index, in April was 31.6% and in Feb it was 9.0%, with reported unemployment at 1.6% in Feb.