Stocks keep backing and filling in a continuous sideways correction. Consumer spending remains flat, and we know the reason why.
WASHINGTON, May 14, 2014 – After paying for the sins of last Friday’s big rally, stock averages steadily ground down for the most part over the last three trading days. That meant we’d have to have another rally soon, and we’re having it today. Once it’s run its short course, stocks will go down again. Wash, rinse, repeat.
Reasons for today’s market action are standard reportage for the clueless financial media. CNBC notes simply that
“The U.S. dollar fell, while the euro topped $1.14 for the first time since February. The U.S. 10-year Treasury yield edged lower to 2.24 percent.
Yay. DuPont (DD) was up today after an initial hit in Wednesday’s trading action. Today’s jump merely restores order because that company’s shareholders actually rejected an “activist investor’s” musclemen, keeping that “value seeking” thief off its board of directors.
All this nonsense is really 1980s “greenmail” action by rich predators whose actions end up stripping companies of the capital they need to grow their businesses, forcing them instead to join the phony stock buyback game that falsely raises earnings per share simply by reducing the number of shares. Fortunately, DuPont was able to shake this parasite off.
Which actually brings us to our thought for the day, which comes from the often sensible, though moderately lefty investment site, Jesse’s Café Américain.
Jesse (whoever he really is) leads off with a quote from macroeconomist Dean Baker:
“The problem of the last three decades is not the ‘vicissitudes of the marketplace,’ but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy.”
Jesse fleshes out the issue by appending a Federal Reserve Economic Data (FRED) chart from the St. Louis Fed that illustrates what this has meant, wage-wise, for the average Joe in recent years, particularly in the time just before and following the economic thunderclap of the Great Recession. We’ve reprinted this chart as our header graphic above. If you’ve been feeling strapped, no matter what your income level, over the past several years, and if you wonder why, wonder no more.
As Jesse quite simply explains,
“If the people have no money, they may buy no goods, even essentials, without falling ever more deeply into debt.
“That is not so difficult to understand. Unless your paycheck demands that you not only cannot understand it, but not even see it, or talk publicly about it.
“And so we have this sad spectacle of Our Great Reformer desperately trying to ram two trade deals through the Congress, without a real examination and debate, in the waning days of his office.
“And we see the continuing attempts by the Congress itself to thwart and undo financial reform under cover of rhetoric and canards, so that they too might get paid by the moneyed interests.
“The harlots of finance and economics will say, ‘You laymen simply do not understand the mysteries of our science. Wages always lag in a recovery.’
“Seven years is some lag. Unfortunately economics these days has less in common with a natural science than it has with marketing. And at its worst, it has become a carney sideshow.”
Since the Great Recession disaster began to unfold at the end of 2007—and even before—the entire financial system has been gamed so taxpayers bore the brunt of the gigantic fiscal disaster that bankers, tycoons, fat cats and the politicians they continue to own were actually responsible for causing.
Since then, not a single member of this wealthy and corrupt cadre has suffered the slightest impairment to his or her outsized income. But you and the Maven have. We continue to patiently await the restoration of our wages and buying power. But it’s increasingly clear that this will never happen, as the chart above makes clear.
This next chart, via ZeroHedge, gives you a similar view:
Jesse concludes that “we might feel better about all this uncertainty if the corruption and distortion that have become embedded in our laws and economic theories, that preceded this and led to a long term secular stagnation in median incomes, had been changed in any meaningful way since the financial crisis.”
But it hasn’t. The corruption and resulting fleecing of taxpayers continues uninterrupted across the U.S., as evidenced, for example, by this report from CBS Chicago on the continuing myopia of unions and politicians in that city in spite of a clearly looming financial Armageddon:
“One day after the city of Chicago took a big hit to its credit rating, a leading bond-rating agency further downgraded the Chicago Public Schools debt to ‘junk’ status.
“The Moody’s Investor Service applied the Ba3 rating to the Chicago Board of Education’s $6.2 billion in debt.
“Like the city, CPS is facing a huge problem with increasing required contributions to teachers’ pensions.
“‘The Ba3 rating reflects CPS’s steadily escalating pension contributions and use of reserves to fund those contributions,’ Moody’s said. ‘We believe pension costs will place increasing strain on the district’s precarious financial position absent material revenue growth or expenditure reduction, both of which appear increasingly difficult for the district to achieve.’”
The teachers’ union’s typical reaction:
“‘The downgrade is an example of how the rating agencies work in concert with bond holders in pushing our city and schools to the brink by recklessly increasing termination fees and costs of borrowing. Today’s action by Moody’s induces further political panic to force the City to implement even more misguided fiscal decisions that will hurt our students and public schools,’ said teachers’ union spokeswoman Stephanie Gadlin.”
Really? Who’s going to pay for the inevitable implosion here? You already know, don’t you?
On the flip side of the coin, the impossibly wealthy 1 percent folks who own the politicians and therefore run the country continue to evade any retribution for their criminal greed are great targets for the equally greedy Chicago teacher’s union. This from CNBC:
“The Justice Department is preparing to announce that Barclays, JPMorgan Chase, Citigroup and the Royal Bank of Scotland will collectively pay several billion dollars and plead guilty to criminal antitrust violations for rigging the price of foreign currencies, according to people briefed on the matter who spoke on the condition of anonymity.
“Most if not all of the pleas are expected to come from the banks’ holding companies, the people said – a first for Wall Street giants that until now have had only subsidiaries or their biggest banking units plead guilty.”
A “first?” Are they kidding?
Maybe for the companies, not the individuals who created this latest chapter of an ongoing disaster involving the blatant and obvious manipulation of foreign currencies, all the better for the bigwigs to profit. It’s the institutions, CNBC, and not the impossibly wealthy individuals who actually committed these crimes, that will end up having to pay the fines incurred these transgressions.
But who will really pay these fines? Individual and retirement fund shareholders, that’s who. They’ll be penalized by a lack of growth in the underlying shares and by a continuation of low dividend payments. Meanwhile, the corporate miscreants will continue to collect their usual outsized pay packages.
Where will all the money from the massive fines collected by the government go? Back to the taxpayers who were hurt? Nope. To the federal government, which, by incompetence, neglect and corruption, turned a blind eye to the underlying criminal actions of the individuals who caused the problem in the first place. That money, in turn, will be spent where the real criminals order the government to spend it—mainly on their own pet projects.
What it all boils down to is a massive, ongoing cycle of institutionalized corruption, a kleptocracy that we all continue to pay for even though it is the major reason why paychecks have been so lousy for so long and continue to get lousier.
Hollow paychecks mean people can’t buy very much. Add this buying reluctance to the average consumer’s heroic attempt to cut down on debt and you have the main reason for this economy’s ongoing lack of growth.
Consumers don’t consume unless they have some money in their pockets. And they don’t. Which is why this market no longer will go up without coming right back down again. The system has been completely rigged, and the old game has run its course. Nobody has a clue as to what will happen next.
Still no trading tips today. It’s just too murky out there to see if anything makes sense.Click here for reuse options!
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