Dow and S&P 500: Is 2009 a Redux of 1938 and 1939? Powerful Spring through Summer Rallies. Market on Track for best Month in Decades.
The recent market rally is going down in the record books. The S&P 500 is up 21 percent in a matter of 3 weeks, which is one of the strongest short-term rallies in the books. In fact, we are on track for our best month since 1987. Yet this rally has the ominous signs of a short-term spring and summer rally that may fizzle out later. Two other years that had strong spring and summer rallies occurred during the Great Depression. With the U.S. Treasury and Federal Reserve flooding the entire system with money and throwing the long-term security of our dollar aside, the system was bound to react even in the short run. Most of the data coming out is still gloomy. Unemployment is rising and credit for the average consumer is still tight. Yet for banks, things just got a lot better thus spurring the current run.
Banking Transparency Gone: The Federal Reserve has been Slowly Moving to more Archaic Forms of Creating Credit. New Plan Will Subsidize Casino Loans for Investors with Taxpayer Money.
While the public is exercising a Freudian fixation on the A.I.G. scandal, misguidedly thinking that A.I.G. is an American company in the sense of G.M. or Ford (it is not although many Americans see a Rorschach American company), the Federal Reserve just decided to increase its balance sheet by $1.2 trillion. This unprecedented action was not unexpected, like rain in the winter but the speed and magnitude tells us that the Federal Reserve and U.S. Treasury are completely set on decimating any value in U.S. dollar. What is even more troubling is over the life span of the crisis, each new program for injecting liquidity and capital into the markets has been less and less transparent.
The Ports of America: Long Beach and Los Angeles Ports see Massive Drops in Cargo. The Concrete Mouth of Consumerism.
The port of Los Angeles and Long Beach are the two busiest ports in the United States. The port of Los Angeles is located in San Pedro Bay which is only a few miles away from the port of Long Beach. Make no mistake, these two ports are incredibly busy ports that provide the spine to a large portion of consumption goods used by many Americans. The port of Los Angeles employs 16,000 workers directly and sits on 7,500 acres. The port of Long Beach is situated on 3,200 acres.
The Long Depression of 1873: Parallels and Comparisons. Are we Missing Economic Information from an Important Piece of American Financial History?
There have been many comparisons to the Great Depression with our current economic crisis. Massive speculation, rampant problems in the banking system, and exponential jumps in unemployment. Yet we may have a lot to learn by looking at the former Great Depression known as the Long Depression. The Long Depression lasted 65 months starting in October of 1873 and running until March of 1879. According to the National Bureau of Economic Research it is the longest period of contraction on record. There is great debate as to the reasons for the Long Depression. Much of the issues come from the fact that prices were falling because of improved productivity and also sound money in gold and silver. We are currently seeing prices falling in many items including homes, cars, and other consumer goods.
Where the Jobs Are and Baby Boomers: Healthcare Growth and the Feeding of a Graying Population. Is a Post-Baby Boomer Society good for our Economic Competitiveness?
Seventy-six million American babies were born between 1946 and 1960 and we call this group the baby boomer group. Many trends can be seen coming with this group. Major toy sellers including Mattel came about this time. In fact, much of their success included this right timing since Mattel was founded in 1945, just in time for all those new babies. But all those babies are now starting to get older in age. It is no stunner that healthcare is now a booming field. In fact, I would argue that even if things stabilize in the banking sector and housing market there will be a glut of homes because many boomers will be downsizing. It really is no coincidence that as our society ages, that healthcare is now being brought to center stage.
The Red, White, and Blue Queen’s Race: The Economy Reverts to Historical Inflation Patterns: Stock Market and Real Estate Fall back in Line with Inflation. Working Harder Just to Stay in the Same Spot.
The Red Queen’s race is a situation that appears in Lewis Carroll’s Through the Looking-Glass where one has to run faster and faster just to remain in the same spot. Imagine a treadmill that increases in speed every 10 minutes yet you don’t burn calories at the higher rate. Many Americans are feeling as if they are stuck in the Red Queen’s race when it comes to the economy. The challenge many are facing is that with an ever stagnant or shrinking paycheck keeping up with the cost of living is simply getting harder and harder as the weeks go passing by. Much of this has to do with the way our Federal Reserve and U.S. Treasury are managing our currency.
Stock Market Volatility Back Again: The S&P 500 has had 3 Major 10+ Percent Moves to Downside Already in 2009: -13.8%, -14.4%, and -11.1%. Market Volatility a Sign of Unhealthy Markets, and We’ve only gone through 2 Full Months.
The S&P 500 has lost 26% of its value in 2009 and we are only in March. This comes on the back of the S&P 500 losing 36% of its value in 2008. Market volatility is typically a sign of major uncertainty and while we did have a slightly stable period once we bounced off the November previous lows, it looks like we are now back in 2008 volatility territory. Keep in mind that we are only a few points away from matching 2008 declines and we’ve only gone through 2 full months of the year. And as many are predicting, we have yet to see commercial real estate really come down or the market changing prospect of nationalization of a few major banks.