10 Pins for the Stock Market Bubble

[Crewleader]

charles hugh smith

August 10, 2009

10 Pins for the Stock Market Bubble

The "Recession is over" stock market rally is just another bubble awaiting a sharp pin. Here are ten such sharp little pins.

I really hate to pop anyone's bubble, but--oh, why try to hide it, I love popping bubbles, especially stock market, credit and housing bubbles. According to the standard-issue financial pundits (SIFPs), the stock market is not only in a new Bull Market but it's heading higher this month--S&P 500 is shooting to 1,200, guaranteed.

Before you join the euphoria, please consider these 10 sharp bubble-popping pins:

1. Structural unemployment is skyrocketing. Job Losses Moderate:

But structural unemployment worsened. The number of people who've been out of work longer than six months soared by a record 584,000 to 5 million, accounting for more than a third of all unemployment for the first time on record.

"Structural" is a polite way of saying there won't be any jobs for the long-term unemployed this year, next year, or the year after that.

2. The jobless rate declined because the work force shrank. This is typical smoke-and-mirrors statistics, courtesy of your Federal government: as people lose extended unemployment benefits, they are classified as "discouraged" and are no longer counted in the "headline" unemployment number.

Unemployment fell by 267,000 to 14.5 million, while employment fell by 155,000. The labor force declined by 422,000, which means the jobless rate declined because people dropped out of the work force, not because they got jobs. The employment-participation rate fell from 65.7% to 65.5%.

3. Everyone seems to have forgotten we need to create 250,000 jobs a month just to stay even with population growth. So while "only" 250,000 jobs were lost last month--never mind a big chunk of employment was linked to the "cash for clunkers" giveaway--that means we're still 500,000 jobs short of a return to a rising employment scenario.

http://www.oftwominds.com/blog.html

[Common Sense Party]

1. Anyone who says the S&P is going ANYWHERE, "guaranteed," is an idiot.

If you say it's guaranteed it's going to "pop" and plunge, you're just as big an idiot as someone who says it's going to 1200, guaranteed.

Joblessness in and of itself is not a drag on the stock market.

[ixion]

2. and the stock market, in and of itself,

is not sound metric by which to measure the real economy. ;)

[pokercat999]

3. P/E of 100 might be a little drag. For years the economy has

been made up of 70% consumer activity (people buying Cars, Houses and Chinese junk), as unemployment grows the people will be able to buy less, the govt cannot continue to borrow enough to float the economy hence, the economy will fail. Good luck with those stocks. Good luck with bonds. Good luck with gold, until inflation kicks in. Good luck with cash IF inflation kicks in. Our only hope is a technological discovery that starts a new US industrial revolution and for some reason it can't be off-shored......good luck with that.

[truedelphi]

4. Are you aware that both Bernanke and Geithner are using a model of

Recovery that states that consumer spending must inherently go up, and SOON! or else the recovery will not be noticeable or long lasting.

The consumer portion of the American economy is something like 70% of the economy. (If you examine any years up to 2007.) So if we don't spend, the economy will stay flat lined.

Right now the economy is getting a nice boost from all the new cars for clunker trading going on at the auto dealerships. But car purchases are only one portion of consumer spending. Retail has been enjoying a bump lately, but as others on DU have pointed out: in large part it is because merchants have finally accepted that the economy is down, and are discounting their stock and making sure it sells.