The Persistence of Fantasy
Courtesy of Michael Panzner at Financial Armageddon
(Image: MoMA.)
It’s not quite as surreal as Salvador Dalí’s "The Persistence of Memory," but there is definitely something otherworldly about the continuing run-up in share prices in the face of renewed uncertainty about the fundamental outlook.
Indeed, in "A Missive From Main Street," the Reformed Broker relays a first-hand report from the economy’s front lines that underscores the differences between the unpleasant reality on the ground and the one that exists in equity traders’ minds:
Reader Alex M gives us a glimpse into the real economy, relaying the following from a rural town on the east coast:
"Hi Josh. I own a business (redacted) in a small town in eastern pa. There is a major disconnect between the stock market and what’s happening on main street.
My local community bank holds meetings for small groups of businessmen to exchange ideas. They do this frequently and it helps us manage our businesses. Yesterday the bank meeting was a real "downer".
The bank reported mortgage delinquencies are increasing as people deplete their savings, small business sales decline and homeowners lose their second income. In our community most people would rather skip a meal and pay their bills, mortgages being at the top of the list.
The bank FDIC insurance premium has increased from $25000 annually in 2007 to $475,000 this year eating up a significant portion of net income. The local businessmen at the table were all struggling except the apple orchard business.
The bank told us that the various other local businesses in previous meetings were trying to be creative to survive."
