It was announced today that US GDP came in at -.1% for the 4th quarter of 2012. The DOW is nearing 14,000 which was last seen just prior to the crash in 2008. The % of Americans in the labor force is at an all-time low. The US has increased its national debt by $6 trillion in the past 4 years, but which of the above has benefited from this spending spree? That’s right: the stock market. How many of you are still playing in that game?
How is it that the DOW is almost 14k again when the economy is technically at an all-time low in terms of employment, consumer spending, and GDP growth? So none of these factor into the value of the stock market anymore?
Not exactly. The phenomenon of the rising stock market is directly related to the Federal Reserves heavy intervention into the markets since the crash, not actual economic activity. Nobody can argue that the economic climate of 2007 is the same as 2013. For all of 2007, unemployment was under 5%. Millions of Americans were spending like crazy because of the artificially ballooned economy. Home prices were 2x or 3x their value. People had 2nd mortgages, a new car, and maybe even a shiny new boat…all paid for with debt. Business was booming…with debt.
So how is it that the market can be at the same level as it was in 2007, despite economic conditions that are entirely contrary to those in 2007? Let me give you a hint…debt. Except it isn’t the debt you and I got ourselves into back in the roaring years of 2002-2007, but the one the country is getting itself into. $6 trillion dollars in 4 years, and all you can show for it is -.1% GDP? Well, the stock market is up! Clearly, the market is the only way to make money in America now. Home prices remain severely depressed. Jobs aren’t coming back and if they do, they’re paying far less than in 2007. What? You aren’t in the stock market? You missed out, man! Better get in now, next stop is DOW 20k! It’ll only cost us another $6 trillion in public debt, you in bro?