Posted on 05/07/2013 4:17:33 PM PDT by Starman417
On Friday, the stock market, driven by record profits and a better than expected jobs report, - not to be confused with a good one - closed at its all time record high. Closing at 1,614, the S&P 500 closed up 148% from the low it reached in 2009. Not bad given that the economy is up a paltry 5.5% over that same period. Already the markets are up over 10% since the beginning of the year. There are a number of reasons for this.
One is the fact that the 500 companies represented the index have been reporting strong revenue and earnings growth, particularly among technology companies like Apple, Google and Facebook. Another factor is that the Fed’s money pump. The Federal Reserve has been pumping $85 billion a month into the economy since the beginning of the year, doubling the $40 billion a month it had been pumping in since 2010. By the Fed driving bond rates to close to zero, the stock market is the natural beneficiary of the dearth of competitive returns. Where else are investors going to put their money?
Then there is the economy. Last week the government announced that the unemployment rate had dropped 7.5% in March, down from a high of 10% in October of 2009. Those jobs numbers sound great, until you look a little closer. The primary reason the rate is down 25% in 4 years is not because of job growth, but rather because so many people have grown discouraged that they have stopped looking for a job all together. Basically, since Barack Obama became president, 9.5 million Americans have simply left the workforce and as such are simply no longer counted. Had those people still been looking for a job - U-5, the rate would be 8.9%, which might not be such good news for stocks.
The reality is that while the stock market may be going gangbusters, the country as a whole is a different story. The simple reason is the stock markets, by definition, reflect the fortunes of big businesses. Currently, for a company to be listed in the S&P 500 it must have a market capitalization of at least $4 billion. That leaves out 99.9 percent of all companies in the United States, including the jobs engine: Small businesses. Small businesses create 64% of all new jobs, employ tens of millions of people and are the places from which large successful businesses emerge.
Basically Wall Street is heading for the stars while Main Street limps along. This is no accident. Two pieces of legislation clearly demonstrate the problem. The first is Obamacare. In 2009 it was passed despite the fact that a majority of Americans never favored it. How? Collaboration between the Democrat party and big business advocacy. Companies as diverse as General Motors, Wal-Mart and Pfizer pushed for the passage of the sainted Obamacare because they understood that the legislation would create a significant benefits for them. In many cases big companies like Wal-Mart understood that they could unload some of their costs on the public, or more importantly, they could saddle small business competitors with healthcare costs they could not afford. As competition dried up, up would go their revenue and profits…
(excerpt) Read more at floppingaces.net...
UNTIL GAS IS $2.00/GAL.......
UNTIL GAS IS $2.00/GAL.......the stock market will not make people happy......private sector growth.....oil, gas; removed regulations and better education about WHY we shouldn’t pollute....government is not the solution
Show me real unemployment rates in the 3% range.
A good and easy to understand analysis.
Thanks
Very good article; thanks for posting it.
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