With the consumer making up about two-thirds of the US economy, we need job growth to sustain this little increase in the economy and maintain current levels of stock market valuations.
The contrasts are too stark to ignore. Stocks are supercharging ahead, while unemployment continues to increase (as of this post at a 26 year high), home prices are stalled and likely to dip further. Emerging markets are eating the developed world's lunch. Asset prices in general are rising far above the economic reality that would rationally support them.
Main Street Americans are struggling to pay their bills, while Wall Street executives are getting record bonuses. Two Americas; trust me it's more than just a campaign slogan. It's the cold hard reality.
The dichotomy continues. Stocks, gold and oil all continue their amazing climb as the dollar descends to new lows.
Russian stocks are up 136% this year, and Brazil is up 117%, far outpacing the meager gains here and in that sick dog of an economy, Japan.
China and India have been kind to investors of late. You can even earn 8.75% on Brazilian bonds while you've lost 16% to date this year holding dollars. That's the most important dynamic in global markets.
Look at the dichotomy another way. The FHA is handing out mortgages on the basis of a 3.5% down payment of the home's value. That's leverage approaching 30-to-1, the kind that brought down Bear Stearns and Lehman Brothers.
Meanwhile, 15 million people are competing for 2.5 million job openings. The amount of time people are looking for a job has hit a new record high. Debt to GDP is still high. Trillions in household wealth have been lost. A bull market in a feeble recovery cannot last forever.
(Source: Forbes)
Saverio Manzo
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