Wow that’s quite a rally off the lows. Let’s see, what originally caused all these problems in the stock market?
If you had to sum it up in just a few sentences you would say that first real estate declined which caused people to get in trouble with their mortgages. That hurt the mortgage-backed paper, which hurt the banks, which lead to the mortgage crisis, which caused massive job losses. This caused even more problem like lower consumer credit, more job losses, more home delinquencies, etc…
Well looking at the first picture (of the stock market) I would guess that all of these issues have been solved or at least improved quite a bit…
First lets look at the crux of the problem, the housing market. To get a rally like in the stock market delinquency rates must have really improved or at least stabilized.
Lets look at the “prime” delinquency rate and see….
Fannie Mae Serious Delinquency rate:
Well, that doesn’t look very good. Actually the national delinquency rate has been skyrocketing in a “hockey stick” manner. 8.78% of all US mortgages are now at least 90 days late! In the bubble states the stats are pretty unbelievable. Florida’s statewide delinquency rate is up 7% over the last year and now stands at 19.38%.
Let that sink in for a minute. Currently 19.38% of all Florida “homeowners” are at least 90 days late on their mortgage. Do you think this is going to lead to higher home prices in the near future or lower? How will this effect mortgage backed paper? Also consider the fact that the $8000 handout from the government runs out at the end of this month.
Ok, so the housing market is not recovering at all. So this market rally must be based on a large turnaround in the jobs market. Folks out of work for a while must be finding jobs in droves. Lets take a look at how many people have been unemployed over 26 weeks.
Unemployed over 26 weeks:
Ok… that doesn’t look very good either.. maybe these folks are just some kind of losers and really the overall job market is improving?
Let’s take a look at all of the recessions since the 1940’s and this current recession and see how the overall job market is doing. With a 80% rally in the stock market it probably has turned quite a bit.
Oh… that doesn’t look too good either. Especially when you consider currently we are counting the 1.2-1.5 million temporary jobs for the US census in these numbers.
Well what about lending and consumer credit. A big part of this crisis according to the talking heads was “banks aren’t lending”. I assume consumer credit has turned around quite a bit then?
Oh… actually it has declined for 12 straight months now and has been declining throughout this whole market rally? Strange…..
So you have a situation where the real estate delinquencies are surging, the job market is not improving and banks are not lending yet the stock market is rallying like it is 1999. How can you explain this?
Easy, the government is spending and giving away more money than in any other time in history (and this is an understatement)
1.5 trillion dollars going to be spent just this year…
A record $220.9 billion deficit in February alone
For every dollar in taxes and other revenues the federal government took in, the government SPENT $3.05.
2.4 trillion needs to be auctioned off in the treasury market just this year.
From Chris Martenson:
"Taken together, this means that in only two short years, 2009 and 2010, as much new Treasury debt will be auctioned off to the public as was outstanding in 1995. Since government borrowing never gets paid down, at least in modern history, it means that the last two years have seen as much borrowing as happened over the period in which electricity was strung to every house, the highways were built, and our population tripled. What can we point to that was created over the last two years to rival those accomplishments? "
So we have paid for this stock market rally with our futures. And the sad part is we have not even improved the things that the average person on the street cares about like the price of their home, their job and if they have access to credit.... we just gave a bunch of money to banks who speculated in stocks and made another valuation bubble.
Do you feel this stock market rally was worth it?
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