Stock market high - who are they kidding?

[JackRiddler]

The stock market hit its new high on the year today with a DJIA of 10464.

The dollar hit its all time low against the euro at just 66 cents.

There is an elementary relationship between these two news items, one that usually goes unacknowledged in the stories falsely associating the stock market rise with economic recovery for the country.

Cheap dollars make US stocks attractive to global investors. That's the first of three factors currently inflating the stock market.

The second factor is that the Fed is holding the prime interest rate at or near zero. For the financial institutions who have access to this privilege, that's a big incentive to take free money and play the market. (Lend it to YOU?! Ha!)

Now the third factor: Since the banking crisis crisis started in August 2007, the Fed and Treasury between them have pumped an estimated 8 trillion dollars into the financial sector. Never mind that this money has been entrusted to the very same class of criminal banksters who wittingly defrauded the entire world in full knowledge that it would inevitably cause a crash. And never mind that the size of the stimulus provided to them is absolutely unprecedented. Prior to this crisis, this sum was not even conceivable as a bailout!

With that kind of boost, a 10464 DJIA is a pretty miserable result. If you're not in the market yourself, you have very little reason to be cheering.

At the end of the IT bubble when the DJIA hit its all time pre-Bush high of 11723 on Jan. 14, 2000, the dollar was worth .98 euros.

Today the dollar has fallen to just .66 euros, or 67 percent of its January 2000 level. (Gold and other currencies are also at all time highs against the dollar.)

In other words, accounting in euros, the DJIA today compared to January 2000 is actually at 7010.

Of course, for investors who bought blue chips earlier this year, the gain is real enough.

Assuming they get out before the banksters cash it in, again. If you're an optimist about where this is all heading, you should at least be aware that the players don't care about you or your optimism.

[CoffeeCat]

1. Very interesting obsevations...

Thanks for sharing...

I often wonder who or what is driving the stock market. When the economy was totally in the shitter--right
after the recession really hit--we would have market rallies. They felt so artificial, as if they weren't
coming from average investors.

I've often wondered about institutional investors and big players--and how much they can affect (manipulate?) the
market. And you mentioned the bailout funds. Those funds were given to the banks because the banks said they
needed to unfreeze capital markets and to rid their balances sheets of toxic assets. The banks didn't use
the money--for either of those things. So where the hell is that money? Are they using it to prop up the
stock market? To manipulate other markets?

Isn't it so interesting that Paulson absolutely insisted that the bailout funds be dispersed to banks NOW--without
any strings or without any rules about how the money could be spent? They were handed blank checks. Then, the
banks didn't use the money for the stipulated reasons. We were told unless the troubled assets were removed,
the entire banking system could collapse.

Seems like they had a specific purpose for the bailout funds--a purpose that was hidden from us.

Who knows. We're just the chumps in the cheap seats--watching these guys play their games, with our money. Ack!

[HughMoran]

2. The facts & analysis are correct

I think the commentary and conclusions are up for debate, though I am watching the market very closely at this time. Trading volume has been very low of late and if any of the big institutional investors do bail, stock prices will fall quite precipitously. The analysis I was listening to was also concerned about the baby-boomers pulling their money (for retirement) starting a couple of years from now. If only these analysis could account for "unknown" economic event that will inevitably make all the predictions null and void.

[Jane Austin]

3. Our international orders are way up.

The cheap dollar seems to be good for our small business.

Orders are up domestically, too, but the international orders are greatly increased.

[Warpy]

4. Unfortunately, everything we use

from the clothing on our backs to the gas in our car to much of the processed food on our tables is going to jump way up in price because we don't make that stuff for ourselves any more.

Maybe that will get our manufacturing back up again. I don't know. Something has to and I really don't see it happening without massive government intervention stripping vast wealth off the billionaires and recirculating it into our own economy instead of China's.

But the OP is correct. The fall in the dollar is directly responsible for the increase in the Dow and I've said that for weeks.

[JackRiddler]

6. Even with the dollar decline the trade deficit is more than $30 billion a month...

http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

Most of that is oil and intracompany trade (as when Walmart imports from a factory it itself owns in China). The first part of that is not going to change, except insofar as the recession gets worse. When it gets better, more oil will be bought (and the oil price will rise, stalling the recovery). The second cannot change quickly, even if the intent were there (why should it be). It will not change long as investment funds for establishing new production in the States are not available, for example because the market still is not considered profitable enough. Also, companies will have to see bottomline incentive, short and long term, in new plant in the US over keeping their current plant in Indonesia. And probably it also will not change long as wages are still much cheaper elsewhere, which will remain the case. In orther words, if devaluation is to work as a trade stimulus strategy for a country that has lost most of its manufacturing base, then the dollar still has a long way to fall, as do, ahem, wages, and many other factors are still involved.

[KT2000]

5. Yes - the stock market is a false flag

A recovery cannot occur without jobs.
Private equity firms and holding companies have been buying up the medium size manufacturing companies in the US - and abroad. They run their companies as if they are financial instruments.
As in the case of Simmons Mattresses, the equity firm borrowed the money to purchase, billed Simmons for the fees and bonuses, used the company as collateral for more loans to buy more companies and Simmons was so stripped they could not weather a slight downturn in business. Bankruptcy and sale to another equity firm.

Holding companies ship their manufacturing overseas, layoff the US employees, make the decision to manufacture crap products instead of the quality products they used to make, use the company for collateral so they can buy more companies.
They are lauded for running their companies "lean and mean" something wall street loves.

The stock market can only reflect how money is being used. An economy encompasses the whole country and its 350 million citizens.