Time to cheer the news?
Only if you’re a fool. Or a Wall Street insider.
Because such market cap gains are Fool’s Gold. Here today, gone tomorrow. Just check the thousands of investors who lost their shirts in previous market crashes.
Take a look at the above Dow Jones Industrials chart. See those dips in 1998, 2002, 2008? That’s what the Dow looked like when the tsunamis hit.
And like today, there was no prior warning. Those who were invested heavily in equities suffered a financial blood bath. The last time around, that also included the major banks, some of whom the US taxpayers bailed out in the aftermath.
Can you think of anything else in your life that has improved 2.4 times in the last 6 years?
Your income probably has not. Mine is actually down since 2008. The value of your home has not gone up by even a fraction of the 2.4 times the stock market has surged.
But our expenses have increased. I know the rents have gone up. And even after the recent drop in oil prices, the retail gas prices at the pump are still about 47% higher than they were during the last downturn in 2008.
As for other transportation costs, the airlines were quick to raise airfares when the oil prices rose. But there have been no reductions so far even though the oil is nearly 50% cheaper than six months ago. Nor is that likely to happen in 2015.
Low oil prices mean cheap airfare, right? Maybe. Maybe not. (The Christian Science Monitor)
“Oil prices continue to plummet, leading to all sorts of economic boosts for consumers. But the drop in oil prices has yet to benefit air passengers, who may or may not see lower airfare in the coming year.
And yet the lower oil prices is the main reason Wall Street traders are citing for their ebullience. Because they would somehow inspire more consumer spending. How can that happen if people have less disposable income than before?
The existing home sales, for example, were down 6.1% in November, the lowest level in six months, according to the latest stats released yesterday. Yet Wall Street ignored the news and pushed the Dow right through the 18,000-level anyway.
“Wall Street Is a Casino for Suckers” (a 1998 quote)
As you can see, the supposedly higher consumer spending is a bunch of Christmas 2014 baloney Wall Street is serving to greedy suckers.
Nothing new about that. Here’s the summary of a story this writer published over 16 years ago titled “How Wall Street Got to Wag Main Street Tail: Fluff Championship of the World” (Oct 1998). The 1997 chart (below) was a part of it…
So what does that tell us? That the Wall Street casino is for suckers?
The only difference is in the dress code. One is stylish and pin-striped; the other garish and loud.
But they both have one thing in common: The suckers. The “Mr. and Mrs. Middle America;” the “get-rich-quick” “Archie Bunkers” of the 1970s, who keep filling the casino owners’ pockets as if there were no tomorrow. And they may eventually get their wish (of “no tomorrow”) when the Babyboomers start cashing their retirement checks, only to find that there is only greed in their accounts.
“O tempora, o mores…” What is America coming to?
Tsunamis Getting Bigger: The Higher the Rise, the Steeper the Drop
You can see on the chart that the tsunamis are getting bigger. But they always seem to bounce off the rock bottom of about 7,500 Dow. If this were to happen again when the current Wall Street tsunami hits, the drop will also be the biggest in history – over 10,000 points.
Which means that nearly 60% of the $17.8 trillion – the current estimated New York Stock Exchange equities paper value – will be wiped out.
Which means “investors,” which in reality means gamblers at the Wall Street casino, stand to lose over $10 trillion of their today’s stock market worth.
So that’s the size of the financial tsunami the equity gamblers may be facing. Lest they forget, “you cannot eat money” as this young woman’s sign reminds us.