WASHINGTON, May 29, 2015 – We have said many, many times here that in today’s politics, if you lie long enough and loud enough, people will think those lies are the truth. That’s especially true when the press trumpets those lies, as it’s been doing about our allegedly “improving” U.S. economy for the better part of five years.
Today’s market action offers a textbook example of a grumpy stock market that’s beginning to wake up to the real facts. While the government and the press bleat on endlessly against the tide, flashing economic green lights when reality shows nothing but red, actual facts show us something entirely different in the current U.S. economic scenario.
Actual government statistics—before verbal gaming—showed definitively the U.S. economy contracted in Q1 2015. Numbers for the Q1 Gross Domestic Product (GDP) actually contracted by – 0.7 percent, revised downward from an earlier, weakly positive estimate of + 0.2 percent. Obviously, these nasty numbers weren’t due to that nasty, global warming climate change induced snow and ice that sent people shivering in the winter just ended.
Economists tried to explain that this wasn’t a real decline, because it was mostly due to lower inventories and lower consumer spending. That’s baloney. These two elements aren’t easily dismissed.
Lower inventories mean that companies are afraid they won’t be able to sell as much as they thought, so they’re keeping less product around in warehouses, lest they get stuck financing excess merchandise. And lower consumer spending, as you’ll recall, has been taking place during the our ongoing price-at-the-pump drop-off, which, as you may recall, was supposed to launch an unprecedented consumer spending boom. Where’d that go?
The economy is still a complete mess, mass quantities of Americans are still either unemployed or grossly underemployed, courtesy in part to Obamacare which makes it smart for businesses to max out their rosters of part-timers. And the only “recovery” in this economy is the increase in earnings per share of stock due to huge company stock buybacks that make declining corporate profits look like improvements. Nothing to see here, folks, move along.
This is all wreaking havoc (or, “wrecking havoc” as newer writers tend to express the term) not only with the official government lies being spun about this “robust recovery.” It’s also making the Fed nervous about raising interest rates, which it desperately wants to do except that it knows what’s really going on and is afraid to pull a Herbert Hoover during the final year of our current emperor’s term, lest the Democrats suffer the same results as Republicans did in 1932.
Given this negativity, plus increasing pessimism by investors that the Greek-ECB-euro impasse will ever be resolved successfully, has more traders and computer programs pulling money out of stock and bond markets and probably shorting markets as well. Or simply sitting on the sidelines. They all fear another Lehman-style 2007-2009 debacle, and those memories are not easily erased from those who watched the bulk of their portfolios vanish in an instant.
So, except for the occasional snapback rally like the one we saw earlier this week, this market’s tendency is to go down faster than it goes up, which is gradually leading to net losses for most investors on the year, a situation made worse by the fact that most trades are now occurring within the first half hour of the market open or in the half hour preceding the market close. The rest of the day is pretty much illiquid with lousy price spreads, which can ensnare unwary small investors.
The system is broke, folks, and no one wants to take the responsibility for fixing it. So we wallow in the thick mud here, looking for some leadership that will never come in the remainder of the current Washington administration.
Muddling by is not a fiscal policy. But that’s pretty much what we have right now, and that’s what this sloppy, negative market is really telling us.