Gary Gibson writes: Ben Bernanke must have been smirking and nodding smugly all day yesterday. The Dow hit an all-time high at 14,286 and closed at 14,253.77. What’s even more impressive is that this is double where the Dow stood just four years ago. And it only took five and a half years and previously unmatched amounts of new money creation to do it.
Also, we think the elation of higher stock prices will wear off when the newly created money inevitably works its way into the price of food and gasoline. As much as the government, central bank and their Keynesian enablers would like you to believe otherwise, newly created money won’t just push up stock prices. It will work its way throughout the economy and drive up food, commodity and energy prices without driving up wages.
When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.
Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.
Bruister, a mother of four, received a $1,160 raise this school year at her job as an eighth-grade computer teacher. The extra cash — about $97 a month, before taxes and other deductions — isn’t enough for her and her husband to keep up with their rising costs, especially after the elimination of the payroll tax break. Its loss shrunk their paychecks by more than $270 a month.
“If you look at how much prices are going up, you get in the hole really quick,” Bruister said. “It’s a constant squeeze.”
In the wake of the Great Recession, millions of middle-class people are being pinched by stagnating incomes and the increased cost of living. America’s median household income has dropped by more than $4,000 since 2000, after adjusting for inflation, and the typical trappings of middle-class life are slipping out of financial reach for many families.
KWN: With key global markets breaking to new all-time highs, and continued volatility in the gold market, today the Godfather of newsletter writers, Richard Russell, believes what we are witnessing right now in markets is unlike anything he’s ever seen in history. Here is what Russell had to say to subscribers:“Yesterday history was made when the Dow rose to a new record high and finally confirmed the prior record high put in by the Transports. The question now becomes — what do we have here, a weird kind of bear market or a new bull market?”
Richard Russell continues:
“The honest answer is that in all my years of studying and dealing with the markets, I’ve never seen anything like the action since the 2009 bottom. As a practice study, I rethought the whole 1920s series as if I was reconstructing the events of 1929. Suppose, after the September, 1929 record high in the Dow, the Rails had turned up from the crash lows and had also risen to a new record high?
Then suppose the Dow had followed, and the Dow had risen to a new all-time high? Such action would have been puzzling, but what would analysts have called it? My guess is that analysts would have simply called it “confusing and unprecedented.”
And I’m going to do the same thing today. The collapse of 2008-09 was labeled a bear market by everybody. The bull market of 1980 to 2007 was obviously a huge bull market which lasted 27 years. Following a 27-year bull market, we might have expected a bear market lasting one-third to two-thirds as long as the preceding bull market.