It's been a while so I figured I'd do another post in my series of "Top Ten Reasons this recession will never end". The last post in the series can be read here.
So without further ado let's take a look at the variables I've been using to assess whether we're making progress...
1) Crashes Hurt for a Long Time - Better
This is the first time this variable has turned green. The DOW is at all-time highs. The Great Depression took 20 years for the stock market to return to the highs at which it crashed. The crash of 2008 has recovered its 'market' losses in only five years.
Having said that, it's with reluctance that I turn this variable to green since the fundamentals don't support the market being at the highs it is at.
While stocks have recovered, what you can get on bonds has shrunk to near nothing. A five-year GIC for instance offers a 1.8 per cent annual return (less than the traditional three per cent inflation the economy experiences).
So essentially, the only reason the stock market is going up is because The Fed in the US has essentially shut down all other avenues for making money on your money. Anything that is 'safe' essentially pays you next to nothing (and actually offers a negative return when you factor in inflation).
But, the stock market is at an all-time high, so the manipulations done to achieve this have worked in that regard and so we must (with severe reluctance due to the rigging of the markets) say this has gone green.
2) Until debt do us Part - unchanged
Us debt still growing. Student debt still growing. Long-term low interest loans still being pushed on consumers as the economy continues to rely on debt to function.
I'd say this has gotten worse, but it really can't get much worse than it is (or than it was in our last update).
3) Eroded Trust - Extremely Worse
Benghazi, IRS Scandal, Tapping of Associated Press phones and emails.
Obama's defense / response to all these scandals has been "Um, I didn't know anything about these things. I found out about them in the media with everyone else."
I'm not sure what is worse, that the US government is engaged in so many activities that lead to these scandals or that the President seems to have no clue what is going on in his own government.
Either way, the endless string of scandals (on top of the 20 or more scandals over the past 10 years) has left the general public with next to no trust in their government institutions anymore.
So much for Hope and Change.
4) Anxiety - unchanged
While unchanged the data just isn't good. A recent report showed that from 2008 to 2010 the rate of increase in suicide in the US quadrupled. You read that right - quadrupled as in increased 400 per cent. More people are now dying from suicide (38,000 death sin 2010) than from auto accidents (33,000 deaths in 2010).
This recession is killing people, whether the politicians want to admit to that or not.
5) Growth versus Replacement Cycle - unchanged
Nothing new here really. TVs are still tvs, smartphones are still smartphones, PCs are still PCs. There's very little innovation going on in the world right now, merely upgrades to existing products and a churn of the user base with replacement cycles.
6) Shareholder Model Breakdown - unchanged
We keep waiting for that headline "Retail Investors Are Back" and it continues not to appear.
It's not hard to figure out why:
1) People don't have the money to invest
2) For those that do, they don't trust the stock market.
If the stock market were back then you'd see bond rates rise. The most simple way to think of bonds and stocks is as competing asset classes. When people want safety they go to bonds, when they want risk (growth) they go to stocks.
If asset allocation is pouring into stocks, then the bonds have to raise their interest rate returns to attract the money back to bonds.
But are bonds raising their rates? No, they aren't. Which means plenty of people are willing to buy bonds and get a measly two per cent rather than risk going back into the stock market.
The stock market isn't rising because people are moving their money into it and bidding up stock prices, it's rising for other reasons (all of which I don't even know).
7) Lowest Common Denominator Thinking - Unchanged
Nothing new here.
8) Globalization - worse
Things are starting to get ugly around the world, specifically Europe.
Greek Youth Unemployment Rises Above 60 Per Cent
France has Returned to Recession
Eurozone now in its longest recession
Cyprus taxes bank accounts
Anyway, you get the point, the world is still a mess.
9) Baby Boomer Costs - unchanged
10) Extremism - worse
The Boston bombings, Newtown shootings, Benghazi attacks, etc.
I don't know if I'd say this variable is worse, but it's definitely a continuation of the negative trend of humans engaging in extreme actions causing pain and suffering.
Bonus Inflation: Unchanged
Inflation hasn't sky-rocketed so that's a good thing. Prices seem to be relatively stable.
So there you have it. Pretty much everything has remained unchanged or gotten worse, and yet, the one variable that has gotten much better has been the stock market.
It's extremely strange to see a variable that is usually linked to all the other variables go up when the other variables have not.
It's a strange, strange world we are living in. I suspect over time we will learn some surprising details around why the stock market has risen while society as a whole remains stuck in a recession.
So without further ado let's take a look at the variables I've been using to assess whether we're making progress...
1) Crashes Hurt for a Long Time - Better
This is the first time this variable has turned green. The DOW is at all-time highs. The Great Depression took 20 years for the stock market to return to the highs at which it crashed. The crash of 2008 has recovered its 'market' losses in only five years.
Having said that, it's with reluctance that I turn this variable to green since the fundamentals don't support the market being at the highs it is at.
While stocks have recovered, what you can get on bonds has shrunk to near nothing. A five-year GIC for instance offers a 1.8 per cent annual return (less than the traditional three per cent inflation the economy experiences).
So essentially, the only reason the stock market is going up is because The Fed in the US has essentially shut down all other avenues for making money on your money. Anything that is 'safe' essentially pays you next to nothing (and actually offers a negative return when you factor in inflation).
But, the stock market is at an all-time high, so the manipulations done to achieve this have worked in that regard and so we must (with severe reluctance due to the rigging of the markets) say this has gone green.
2) Until debt do us Part - unchanged
Us debt still growing. Student debt still growing. Long-term low interest loans still being pushed on consumers as the economy continues to rely on debt to function.
I'd say this has gotten worse, but it really can't get much worse than it is (or than it was in our last update).
3) Eroded Trust - Extremely Worse
Benghazi, IRS Scandal, Tapping of Associated Press phones and emails.
I'm not sure what is worse, that the US government is engaged in so many activities that lead to these scandals or that the President seems to have no clue what is going on in his own government.
Either way, the endless string of scandals (on top of the 20 or more scandals over the past 10 years) has left the general public with next to no trust in their government institutions anymore.
So much for Hope and Change.
4) Anxiety - unchanged
While unchanged the data just isn't good. A recent report showed that from 2008 to 2010 the rate of increase in suicide in the US quadrupled. You read that right - quadrupled as in increased 400 per cent. More people are now dying from suicide (38,000 death sin 2010) than from auto accidents (33,000 deaths in 2010).
This recession is killing people, whether the politicians want to admit to that or not.
5) Growth versus Replacement Cycle - unchanged
Nothing new here really. TVs are still tvs, smartphones are still smartphones, PCs are still PCs. There's very little innovation going on in the world right now, merely upgrades to existing products and a churn of the user base with replacement cycles.
6) Shareholder Model Breakdown - unchanged
We keep waiting for that headline "Retail Investors Are Back" and it continues not to appear.
It's not hard to figure out why:
1) People don't have the money to invest
2) For those that do, they don't trust the stock market.
If the stock market were back then you'd see bond rates rise. The most simple way to think of bonds and stocks is as competing asset classes. When people want safety they go to bonds, when they want risk (growth) they go to stocks.
If asset allocation is pouring into stocks, then the bonds have to raise their interest rate returns to attract the money back to bonds.
But are bonds raising their rates? No, they aren't. Which means plenty of people are willing to buy bonds and get a measly two per cent rather than risk going back into the stock market.
The stock market isn't rising because people are moving their money into it and bidding up stock prices, it's rising for other reasons (all of which I don't even know).
7) Lowest Common Denominator Thinking - Unchanged
Nothing new here.
8) Globalization - worse
Things are starting to get ugly around the world, specifically Europe.
Greek Youth Unemployment Rises Above 60 Per Cent
France has Returned to Recession
Eurozone now in its longest recession
Cyprus taxes bank accounts
Anyway, you get the point, the world is still a mess.
9) Baby Boomer Costs - unchanged
10) Extremism - worse
The Boston bombings, Newtown shootings, Benghazi attacks, etc.
I don't know if I'd say this variable is worse, but it's definitely a continuation of the negative trend of humans engaging in extreme actions causing pain and suffering.
Bonus Inflation: Unchanged
Inflation hasn't sky-rocketed so that's a good thing. Prices seem to be relatively stable.
So there you have it. Pretty much everything has remained unchanged or gotten worse, and yet, the one variable that has gotten much better has been the stock market.
It's extremely strange to see a variable that is usually linked to all the other variables go up when the other variables have not.
It's a strange, strange world we are living in. I suspect over time we will learn some surprising details around why the stock market has risen while society as a whole remains stuck in a recession.
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