The Fincancial Bubble of 2013

The Financial Bubble of 2013

While the Dow Jones is making new highs, the percentage of Americans of work force age that are in the workforce continue to reach new lows.  If the same number of jobs existed today that existed when Obama came into office, the unemployment rate would be easily over 11%.  The divergence between 11% and the official unemployment rate of 7.4% represents the people who have stopped looking for work.  This is an unemployment rate that has been going down by attrition rather than by growth.

So, why does the stock market keep making new highs?  It is simple.  Interest rates are low so investors have now where to go but to buy stock and, as a result of low interest rates the housing market is starting to come back.  The other area that has been very strong this year are cars.  Strong auto sales and strong housing would normally be a sign of strength. After all, when someone buys a house, they buy a plethora of other things ... washers, dryers, carpet but even other things that one doesn't think about, like life insurance.  In like manner, when people buy cars, that induces a great deal of capital investment by the car companies in many other companies that invent and produce what carmakers need.

There is something very different this time. In the past American has greeted growth with open arms and policy and tax decisions to keep the ball rolling. In this case, a company that grows will be punished in any number of ways.  Interestingly enough, most of these regulations are not really fought by big business.  All they have to do is pay their staff of attorneys to tell them how to comply and a massive new regulation is just another incremental cost of doing business.  However, to a doctor's office, a cleaning service, or small to midsized manufacturer, these regulations are a burden that they cannot carry.  So, the Government is actually getting rid of the competition for the big fish.

This is a bubble that will collapse in upon itself.  There is no growth.  Who really believes the basically 0 inflation numbers we are lied to about.  It's obvious that the people who calculate these numbers don't fill up their car or buy groceries.  And if you are a renter, you've see substantial increases.  So the anemic growth rate of 2.5% that is reported in the GDP,  given whatever the actual inflation really is, is an illusion.

The only place where I have seen real growth, is in Washington DC and surrounding areas.  The only problem with that is that they are doing that by sucking the other 48 states dry.

This bubble is like any other bubble, except much bigger than we have seen before.







Cw Markham 9/18/13