To listen to the mainstream media trying to spin appalling numbers on the economy into signs of recovery is amusing. It's almost as if the nation views the current crisis like one of those long, terrible work weeks that has finally come to an end. T.G.I.F - "Thank God It's Friday" is in the air, as news stories cite university polls claiming consumer "confidence" ticked up, and other stores trumpet a slowdown in jobless claims...This while GM heads in to Bankruptcy June 1st, Chrysler is all but dead, interest rates spiked up on mortgages and all but froze the financing pipeline yesterday, foreclosures continue to increase at a breakneck pace, and statistics show that 25% of all prime, 45% of all Alt-A, 50% of all Subprime and an alarming 73% of all Option ARM loans are now underwater. Somehow the media managed to take those numbers and come up with a story that "12% of homes were under water." How did they get 12% by averaging 25, 45, 50 and 73? Simple: they added in all homes owned free and clear. They talked about homes instead of homes with mortgages. It's duplicity at best, deception at worst. There was even excitement about the sad fact that the US GDP shrunk by -5.7% instead of -6.3%. TGIF! Weekend at last. Market rally! Party time!
I think not.
A slowdown in the downward spiral for job loss, housing depreciation, foreclosures or any other marker is not a recovery. The massive effort of the Treasury and Fed to backstop the declines in finance, housing, auto sales and other areas may have created the illusion of stability being restored, like a pilot who manages to take a falling plane out of a spin--yet the nose is still pointed decidedly down. Let's face it--any real recovery will depend on real production and growth. A recovery is job gain each month, not job loss. A recovery does not see record numbers of mortgages in delinquency and default. A recovery is not diminishing housing sales, construction and sluggish spending all across the retail sector. The consumer confidence number is just a mood. Any real recovery will depend heavily on significant new consumer spending, and that is just not happening--not with the debt load people are carrying, credit all but gone, and unemployment that will continue to climb for some time. And where will the new jobs come from? Wal-Mart can only hire so many new retiring Boomers for door greeting positions.
The stock market spring rally is just a trader's game, nothing more. It is in no way reflective of growing profitability in the companies issuing stocks. Consider GM's depressing profit outlook and the fact that its stock is now selling at about 8o cents a share. Meanwhile, oil is up 30% to near $66, and the Bond markets have been very jittery. I hate to sound so negative, but a wise man once told me: "Statistics are like bathing suits--they reveal just enough to be interesting, while hiding that which is essential." And the essential truth behind the numbers is that we are far from any sign of a real recovery. We can yell TGIF and look for some relief in this brief weekend of our stabilizing fall, but come Monday morning it's back to reality.
I think not.
A slowdown in the downward spiral for job loss, housing depreciation, foreclosures or any other marker is not a recovery. The massive effort of the Treasury and Fed to backstop the declines in finance, housing, auto sales and other areas may have created the illusion of stability being restored, like a pilot who manages to take a falling plane out of a spin--yet the nose is still pointed decidedly down. Let's face it--any real recovery will depend on real production and growth. A recovery is job gain each month, not job loss. A recovery does not see record numbers of mortgages in delinquency and default. A recovery is not diminishing housing sales, construction and sluggish spending all across the retail sector. The consumer confidence number is just a mood. Any real recovery will depend heavily on significant new consumer spending, and that is just not happening--not with the debt load people are carrying, credit all but gone, and unemployment that will continue to climb for some time. And where will the new jobs come from? Wal-Mart can only hire so many new retiring Boomers for door greeting positions.
The stock market spring rally is just a trader's game, nothing more. It is in no way reflective of growing profitability in the companies issuing stocks. Consider GM's depressing profit outlook and the fact that its stock is now selling at about 8o cents a share. Meanwhile, oil is up 30% to near $66, and the Bond markets have been very jittery. I hate to sound so negative, but a wise man once told me: "Statistics are like bathing suits--they reveal just enough to be interesting, while hiding that which is essential." And the essential truth behind the numbers is that we are far from any sign of a real recovery. We can yell TGIF and look for some relief in this brief weekend of our stabilizing fall, but come Monday morning it's back to reality.
