I’m Proven Wrong Again!
Here are two of today’s headlines:
Obviously, those of us who might be deemed ‘doubters’ or ‘unbelievers’ of this Fed-‘fed’ economy (my computer wants to delete the ‘repeated word’), can finally tuck our tails and run away in shame. The DOW is indisputable evidence that our nation’s and central banker’s monetary policy is working and all us ‘pessimistic perma-bears’ must finally accept reality. Clearly we are living in a new economy — one where all asset classes can go up at the same time; one where you can pile on new debt by the trillions and buy your own debt by printing new dollars; one where the retail investor has not participated in this market run–up; and one where government promised benefits and programs do not need to be funded or even have a inkling of an idea how they might someday be funded.
Obviously, my theory that we are living in an economic house of cards has been obliterated today. The Fed has actually defied gravity and there are no apparent unintended consequences like I learned as a kid watching Wile Coyote and the Roadrunner. I guess Wile Coyote lessons on Sunday mornings were not a good enough formal education to challenge the masterminds of current monetary policy. It is such a marvelous time we are living in — we are able to borrow indefinitely, print indefinitely and defy gravity without repercussion. While no other nation has ever survived such a money-printing experiment without consequences, we are special.
Here are some examples of how the markets are doing well, then (October 11, 2007) and now:
- Dow Jones Industrial Average: Then 14164.5; Now 14164.5
- Regular Gas Price: Then $2.75; Now $3.73
- GDP Growth: Then +2.5%; Now +1.6%
- Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
- Americans On Food Stamps: Then 26.9 million; Now 47.69 million
- Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
- US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
- US Deficit (LTM): Then $97 billion; Now $975.6 billion
- Total US Debt Outstanding: Then $9.008 trillion; Now $16.43 trillion
- US Household Debt: Then $13.5 trillion; Now 12.87 trillion
- Labor Force Participation Rate: Then 65.8%; Now 63.6%
- Consumer Confidence: Then 99.5; Now 69.6
- S&P Rating of the US: Then AAA; Now AA+
- VIX: Then 17.5%; Now 14%
- 10 Year Treasury Yield: Then 4.64%; Now 1.89%
- USDJPY: Then 117; Now 93
- EURUSD: Then 1.4145; Now 1.3050
- Gold: Then $748; Now $1583
- NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares