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Wall Street’s “Recovery” Leaves Main Street Mugged in the Gutter

Wall Street’s "Recovery" Leaves Main Street Mugged in the Gutter

Courtesy of Charles Hugh Smith, Of Two Minds 

31st March 1951:  A sandwichman, who carries an advertising board on his shoulders, standing in the gutter on a London street. He is not allowed on the pavement.  (Photo by Charles Hewitt/Picture Post/Getty Images)

Rising costs and taxes and declining income have mugged Main Street while Wall Street revels in the Fed-engineered "recovery"--in the stock market.

The Fed would have us believe that the stock market is the leading indicator of the economy: if stocks are rising, then that is strong evidence the economy is improving.

This is the bogus "wealth effect" I have taken pains to discredit:

Why the Fed’s ‘Trickle-Down Economics’ Is Failing

Are the Fed’s Honchos Simpletons, Or Are They Just Taking Orders? (Nov. 1, 2010)

Fraud and Complicity Are Now the Lifeblood of the Status Quo (Nov. 12, 2010)

Fed’s QE2 Misadventure Costs U.S. Households $4.6 trillion (Nov. 10, 2010)

Main Street didn’t buy "the stock market is rising, so you must be richer" either, for the simple reason that Main Street’s wallet is now much thinner. Even as the S&P 500 has soared 80% from its March 2009 lows, 70% of Americans don’t believe the recession is over.

That must really hurt the apparatchiks in the Ministry of Propaganda and the Fed. Here they go to all this trouble to orchestrate a bogus stock market rally and Mainstream Media propaganda campaign hyping "the recovery," and Main Street America refused to buy it. How irksome.

It seems Main Street’s grasp on reality is firmer than that of either the Fed or its partner, Wall Street.

Let’s consider income.

The stock market rally off the March 2009 lows was by some measures the sharpest such advance in the past 100 years. Yet as stocks went on a tear,household income actually declined. According to the Census Bureau, the median household income fell 0.7% to $49,777 in 2009, down 4.2% since pre-recession 2007.

The Federal Reserve’s stated policy objective is to boost the stock market to trigger a "wealth effect" which will then lead consumers to open their wallets.

As noted here before, the Fed failed to notice that only the top 10% of households hold enough stocks to see much benefit from a rising market. Household income actually fell, despite the huge run-up in stocks.

In other words, a rising stock market did not increase household incomes. The Fed is gambling on an effect with no evidence to support it.

How about jobs?

While the Bureau of Labor Statistics reported that…
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BERNANKE’S GREAT MONETARIST GAFFE

BERNANKE’S GREAT MONETARIST GAFFE

Courtesy of The Pragmatic Capitalist 

I had to chuckle at the headline on Yahoo Finance throughout much of Monday’s trading session:

rateshead BERNANKES GREAT MONETARIST GAFFE

It’s an accurate headline.  Mortgage rates have declined in recent weeks as U.S. government bonds have surged.  But the actual article was filled with very dramatic certainties (most of which were inaccurate and/or misleading).  For instance, the excellent Mark Zandi of Moody’s was quoted saying that we are seeing a once in a generation buying opportunity in real estate:

“It’s the best time in our generation to buy.  It may be the best time in any generation. Mortgage rates are so low and with homes prices down and lots of inventory, you couldn’t pick a better time to buy or re-finance.”

Wow, sounds like we should all go out and buy houses, right?  It gets rosier though.  The article details why we should all run out and buy houses immediately:

But the decline in rates probably won’t last long, analysts say. So homeowners need to move fast.

“I think they won’t last much longer than a month or two at the best,” says Lawrence Yun, chief economist at the National Association of Realtors. “I can see them going up to 5.5 percent by the end of June if not sooner.”

Move fast, huh?  Prices are low.  Rates are going back up.  That sounds pretty convincing.  If interest rates (and home prices) are only going to be low for a brief period then we should capitalize on that opportunity.  Right?   But then the article takes a dramatic turn for the worst when they try to explain the actual fundamentals behind the rising interest rate argument:

“The US is fortunate now that there’s no pressure on interest rates,” Yun goes on to say. “But going forward, higher rates will be needed for financing the debt.”

(Screeching sound).   Uh oh.  Here we go again with the hyperinflation, the USA is dying, the dollar is finished, higher interest rates will be needed to “finance our debt”, argument.  The dots are easy to connect in this article.  In essence, the article implies that interest rates are at record lows because investors have sought the safety of government bonds and mortgage rates have subsequently declined.  What they fail to expand on is why interest rates have been declining in recent weeks when, according to…
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Merkley for Main Street

Merkley for Main Street

By Bryce Cover, courtesy of New Deal 2.0

Senator Jeff Merkley took to the Senate floor on Tuesday, complete with fist pounding, to air his frustration over the blockage of the Merkley-Levin amendment that would fortify the Volcker Rule. The rule restricts banks that have access to FDIC insurance from speculative trading. What he wanted to know: “Why is Wall Street winning and Main Street losing tonight in the US senate?” Watch his passionate speech:

 

See also: Merkley-Levin Amendment Can’t Get a Vote 


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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

PReSeNTING THe LaTeST ZiMBaBWe NoTe

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

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Phil's Favorites

Home Prices Drop in 69 of 70 Chinese Cities; Did the Pool of Greater Fools Run Out?

Courtesy of Mish.

China eased purchase restrictions last month ending its four-year campaign to contain home prices. And what a ridiculous campaign it was. Prices are down less than 1% this month and less then 1% year-over-year.

Bloomberg reports China Home-Price Drop Spreads as Easing Doesn’t Halt Fall.

Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. They fell in 68 cities in August.

The central bank on Sept. 30 eased mortgage rules for homebuyers that have paid off existing loans, reversing course after a four-year camp...



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Chart School

World Markets Weekend Update: Selloff Ends, Rally Begins

Courtesy of Doug Short.

In last weekend's update, only one the eight indexes on my watchlist posted a weekly gain. This weekend's numbers have reversed. Seven indexes closed the week with a gain and there were some substantial ones at that. Japan's Nikkei erased the previous week's -5.02% plunge with a 5.22% surge. The S&P 500 finished second with a 4.12% advance. China's Shanghai Composite was the sole loser, down 1.66%.

In fact, the Shanghai Composite remains the only index on the watch list in bear territory -- the traditional designation for a 20% decline from an interim high. The index is down 33.68% from its August 2009 peak. See the table inset (lower right) in the chart below.

Here is a look at 2014 so far....



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Insider Scoop

UPDATE: Morgan Stanley Reiterates On ResMed Following 1Q15 Earnings Report

Courtesy of Benzinga.

Related RMD Morning Market Movers Qualcomm Announces New Connected Health Collaborations at Connect 2014

In a report published Friday, Morgan Stanley analyst Sean Laaman reiterated an Equal-Weight rating on ResMed (NYSE: RMD), and raised the price target from $46.19 to $49.57.

In the report, Morgan Stanley noted, “Currency headwinds and part quarter release of the S10 downplayed expectations ahead of the result. Despite this, RMD beat on US revenue driv...



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Market Shadows

Bill Ackman's Big Pharma Trade Is Making Wall Street A Super Awkward Place

 

#452525522 / gettyimages.com

Intro by Ilene

If you're following Valeant's proposed takeover (or merger) of Allergan and the lawsuit by Allergan against Valeant and notorious hedge fund manager William Ackman, for insider trading this is a must-read article. 

Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Linette goes through the con...



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Option Review

LUV Options Active Ahead Of Earnings

There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...



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Sabrient

Sector Detector: Sharp selloff in stocks sets up long-awaiting buying opportunity

Courtesy of Sabrient Systems and Gradient Analytics

Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.

Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...



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Digital Currencies

Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby's Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...



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OpTrader

Swing trading portfolio - week of October 20th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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