Truly astounding upward manipulation of the stock market over the past 7+ years and especially since February 11 of this year, right when the market was tanking in the direction of fair value for this masked depression, Janet Yellen gets on the phone with the Bank of England and miraculously, the market shoots up with hardly a step down for the next several months at a clip faster than the internet go-go years of the late 1990’s. Now how could this really happen as our bank interest continues to be hijacked for over 8 years taking money away from us to spend, wages on a real basis continue to fall, housing expenses continue to rise, vehicles, food, health care, car insurance cable TV, phone service, and everything else seems to be going up, less the price of some consumer electronics which does not contribute a large percentage of living expenses?
How can one understand the upward movement of the stock market relative to the back-drop of the reality we are stuck in an economic depression? We are not in a recession nor are we in a recovery. I demonstrated four years ago that the real GDP growth upon proper accounting was at negative 10%. The most recent contrived figure of +2.9% is actually around NEGATIVE 5%! How is this? Just review my demonstration in an article showing how government plays with factors and wholly disregards relevant factors going into calculating the real GDP growth. With the complicit media and pseudo-economists getting free media attention, stock pumping propagandists all over the financial areas of the internet, the plunge protection team actions, and Federal Reserve in particular still teasing us about giving us the long awaited and promised numerous interest rate hikes and not delivering, we end up being not just an ordinary bubble but a bubble with baseless fundamental support.
Doing the requisite math, utilizing the relevant confounding factors affecting the real GDP growth rate that government suppresses or wholly ignores:
The government claimed inflation rate of 1.5% offset by a reputable third party organization that does not try to fudge the data as government does at the present time, using the pre-1990 methodology of computing the monetary inflation rate arrives at 5.5%, gives a 4.0% difference in the direction away from which our government would like to say the rate is.
The population inflation rate is also relevant, and which it has been on the decline in recent years, possibly as a result of tightened immigration policy, economic malaise of not being able to afford making children, and a general desire of being more financially responsible. The population growth rate was very close to 1.0% only about 15 years ago and steadily declining to about
.75% today. The purpose of subtracting out the population inflation rate should be quite obvious but if not, consider if all other confounding rates were zero and the population inflation rate were 100% (doubled) while at the same time the nominal GDP doubled. One could not say that the doubling of the GDP was in any way better as the population also doubled which means there has been no change on a per capita basis.
The other very crucial component in calculating the real GDP growth rate is the artificial propping up of the GDP via deficit spending. With the GDP at $18.7 trillion and the a rel="nofollow" target="_blank" href="http://www.usgovernmentspending.com/federal_deficit_chart.html">FY 2016 federal deficit at $587 billion, the percentage of the GDP due to deficit spending is 3.14%.
And so, to put into proper accounting, taking the contrived figure of 2.9% for the real GDP growth rate for 2016 Q3 and subtracting out the monetary inflation rate difference between what government claims presently over their former pre-1990 unadulterated method which amounts to 4.0%, the population inflation rate of 0.75%, and the percentage of the GDP due to deficit spending of 3.14% comes right to -5.0%. That's NEGATIVE 5%! A far cry from the touted figure of +2.9%.
According to stock valuations per an economy in such bad shape, we’ve moved from the market being 2 times overpriced at around 2012 to presently 3-4 times overpriced, with small caps at the 4 times factor. These extreme factors are so excessive that it amazes me money is still pouring into the stock market, though it may not be much from individual investor that would be more akin to gambling at these level as it is not investing when so far on the correct side of fair value relative to any reasonable valuation model.
Now, just imagine if our government gave the straight scoop on the real GDP growth, showing it to be deeply negative for 8 years running? You think the Federal Reserve would get away with their persistent upward manipulation? You think many would not be reallocating their 401-K? You think people would still be going long no matter the actual state of the economy and ridiculously high valuations? It should be pretty obvious what would happen. Millions of people made the error of not abiding by valuations in the late 1990’s though at least then there was the mystery of untold riches from the internet. Today we have corporate profits inflated from accounting shams, cost-cutting, and still, on average from two years ago, profits falling 20%. Is this why stocks are even higher now? It’s absurd that with a 20% drop in corporate profits there would be the upward surge we saw from February 11, 2016 and even the surge from November 7 to November 10, 2016 adding around 1,000 points to the DOW on no improvement to the economy.
So what if the stock market fell. Does a higher stock market make the economy better? No. Conversely, a lower stock market does not necessarily make the economy worse. To the greater majority of people, a lower stock market would actually be better as it’s really a sandbox for money to be put in, hardly much of it actually being put into an investment by corporations anyway. As the stock market goes higher, the overwhelming majority of the gains end up in the hands of the wealthy and often gets converted into buying up more residential properties which then in turn makes rents and home prices go even higher. I know the media has many brain-washed into thinking higher home prices are good. But that’s true only if you are the owner, not a potential buyer. No one can convince me that paying $400K for a home is better than paying $200K for the same home. The excessive money going into corporate stocks today do more to fuel higher executive compensation and does not imply there will be higher profits in the future. Note the many corporations who are well past the growth stage where they really required money to grow. And then you have to appreciate the many who are getting destroyed by being financially responsible in investing on value per reasonable valuations models. It’s unjust. Sure, it would be understandable if markets get out of whack 10,20,or 30% at times, but not over 200% as it is presently. This is something that our government regulators should have done something about long ago but apparently, no one is willing to take on the Federal Reserve. And thus we have this gigantic bubble and we continue going deeper in this masked depression we are in. An economy cannot be fixed when the middle class continues to be fleeced and the wealthy continue getting coddled.
To those whom have their shades on and are long this most ludicrously high market, they really should be considering what makes sense in terms of valuations and the actual state of the economy. However, they still may want to gamble on more upward manipulation that has absolutely nothing to do with corporate profits! The excuse of low yields in bank interest do not match the possible 70+ percent declines if we get to some semblance of fair value for this extended masked depression. Isn’t investing about the profits or is it different? If it’s different then it’s clear the stock market is not so much about investing. Well, without going into some deeper mind-bending realizations about what the stock market is really about in recent years, I’ll summarize by simply saying there is nothing to justify the market being 3 times higher than in 2009, nothing.
Truly astounding upward manipulation of the stock market over the past 7+ years and especially since February 11 of this year, right when the market was tanking in the direction of fair value for this masked depression, Janet Yellen gets on the phone with the Bank of England and miraculously, the market shoots up with hardly a step down for the next several months at a clip faster than the internet go-go years of the late 1990’s. Now how could this really happen as our bank interest continues to be hijacked for over 8 years taking money away from us to spend, wages on a real basis continue to fall, housing expenses continue to rise, vehicles, food, health care, car insurance cable TV, phone service, and everything else seems to be going up, less the price of some consumer electronics which does not contribute a large percentage of living expenses?
How can one understand the upward movement of the stock market relative to the back-drop of the reality we are stuck in an economic depression? We are not in a recession nor are we in a recovery. I demonstrated four years ago that