Measuring the average American's economic well-being using stock prices

[MannyGoldstein]

Is like measuring a person's health by the size of their doctor's bank account.

Just as docs usually make more when their patients do worse (more procedures are needed), the stock market usually does better when corporate earnings are boosted by squeezing the 99%. As is happening today.

It's just nuts. Amazing how people can be so buffaloed by numbers.

[hrmjustin]

1. Amen to that Manny!

[Erich Bloodaxe BSN]

3. Yup. Stock Market going through the roof?

Fantastic for corporations and rich people, who own most of the stocks.

A pointless metric when applied to most Americans.

[quinnox]

16. Mitt Romney and his ilk should be doing happy dances! President Obama has been very, very good to

them. He even caved to the GOP and their patrons and allowed a much lower increase in the tax rate on the ultra-rich than should have and could have been made at the time, and blew yet another huge opportunity.

[quinnox]

4. Yup, I don't think they even understand how this looks

The economy has been horrible for average people, and there are a boatload of statistics that confirm that. Long term trends are dismal, and have been for years.

There are some who don't even understand that the official unemployment rate is a "massaged" number, that it doesn't represent the actual unemployment number. The real number is much higher than the reported number, but bring this fact up, and your post might get alerted on (no kidding). I guess it spoils the "mood" or some such kool-aid crap.

[Dragonfli]

61. I have seen this graph posted

Would like to know more about the stats that produced it. It shows a very high true unemployment number.

[arikara]

62. Yes, that looks more realistic

I know its pretty much the same here in Canada, they only count people who are on EI (Employment Insurance) this after they drastically narrowed the criteria for those allowed to apply and lessened the number of weeks people can collect. Since they did that the program always has a big surplus which goes into general revenue so its just another tax grab on the 99%.

They don't include people who are on welfare, or people who have given up altogether. Nor people who are underemployed, working a few hours a week and/ or making minimum wage.

[Doctor_J]

5. They see what they want to see. ACA is now the answer to our healthcare problems,

and the djia means the economy is all better. They'll be pissed when all of these new burger flippers don't flock to the polls in gratitude though

[Scuba]

11. Bingo!

[winter is coming]

13. The funny thing about that is that I used to be a centrist, and now I'm "extreme left",

yet my political views haven't changed.

[MannyGoldstein]

25. Our President has said he's basically a 1980's Republican

and he's squarely in the middle of today's Democratic leadership.

(But to the *right* of two-thirds of Americans.)

[winter is coming]

27. Oh, hush your purist rantings. n/t

[Doctor_J]

32. anywhere is fine

Liberals have taken a non stop battering for 35 years now. I barely feel it any more.

[Warren Stupidity]

63. I like to be punched in my hippie.

[BlindTiresias]

45. Very astute

it is a winning strategy to deflect blame but not an actually winning strategy.

[BillZBubb]

6. I'm not as dismissive of the market as you are.

Sure, using only the stock market as a measure is nuts. The 1% own most of the stocks. So, there are many other, better indicators.

But, a rising market often means unemployment is shrinking and payrolls are larger. It also usually means stock buyers are satisfied the economy is going to grow--they are betting on it.

It is worth noting that stock prices through US history have risen significantly faster under Democratic administrations than the incompetent, "business friendly" republicans. I would argue that the average American was better off under those Democratic administrations.

It is not a zero sum game. Stock prices can rise and along with them the average American's economic well being. They often coincide. Historically the average American is better off when stocks are rising in price than when they are falling according to other measures such as real median wages.

[MannyGoldstein]

35. This...

http://www.democraticunderground.com/10025197051#post23

[Nye Bevan]

8. Stocks rose yesterday because of the great jobs report.

We had the strongest 6 months of job growth since 2006. And unemployment is at its lowest level since 2008. You don't think this is something that might benefit average Americans?

[MannyGoldstein]

10. The stock market's doubled since it bottomed in 2009

The economy for the average American is dragging along at the bottom or still getting worse.

The real story is measured over years, not hours.

[Nye Bevan]

17. And unemployment has fallen from over 10% to 6.1% in that time (nt)

[MannyGoldstein]

19. The fake unemployment number has, true.

For example, it doesn't count despondent people who've given up on finding work.

Check out U6: that's closer to real unemployment.

[Nye Bevan]

21. OK. That has fallen from 17.1% to 12.1%.

http://portalseven.com/employment/unemployment_rate_u6.jsp

Can you at least admit that the trend us somewhat favorable?

[MannyGoldstein]

22. Yes, U6 is improving, but it's not clear that it's the whole truth, either

although it's clearly more realistic than the "official" government numbers.

Many people feel that shadowstats.com does a better job of deriving the true unemployment rate, although I haven't researched them myself. They say that unemployment's still getting worse:

http://www.shadowstats.com/alternate_data/unemployment-charts

My own anecdotal sense is that things are finally starting to get a bit better. But I live in an atypical place, work in an atypical field, and hang with atypical people, so who knows?

[Tuesday Afternoon]

9. Pretty much truth

[rhett o rick]

12. Great analogy Manny. The Stock Market is a measure of the well being of the wealthy. nm

[woo me with science]

14. Thank you.

Amazing anyone can stand up in here with all the spinning.

[TransitJohn]

15. K& Fucking R

Right on. Imagine if economic reports talked about wages, employment rates, and consumer financial health.

[airplaneman]

18. Thanks Manny! You got that one right. n/t.

[Cartoonist]

20. Rear Window Message

I've noticed a lot of teabaggers are using a white marker to make idiotic slogans and diatribes on their car's rear window. Bumper stickers are not enough. I've been contemplating doing the same to get them riled up.
What I've been thinking of saying:

Dow Hits 17,000
Obama lifts USA
from GOP bankruptcy

My qualms are just what this thread is about. Does the Dow really say anything regarding the economic condition?

[MannyGoldstein]

23. Only when policies tie everyone's economic well-being together

Our country used to have policies that ensured that when the rich did better, everyone did better. During those times, if the stock market did better then one could assume that the 99% were doing better, too.

Those policies are gone, baby, gone. The fortunes of the wealthy and the 99% are not just uncorrelated, they're anti-correlated: when the rich do better these days, it's usually because they've stolen from the 99%.

[Jackpine Radical]

29. You have to look at the forces driving the market.

For one thing, savings account interest in the banks is below actual inflation (i.e. inflation that counts those bothersome "volatiles" like energy & for). If you're trying to build a nest egg, you have little choice between putting it into low-paying bonds & risky stocks.

Also, remember that the market is no longer driven by the actual earnings of the companies, but by all sorts of speculative games, panics, and lemming migrations. Price-to-earnings ratios are totally nuts.

[ctsnowman]

43. "Price-to-earnings ratios are totally nuts."

Exactly. The rich have so much money they have no idea what to do with it. The one thing they will not do is create jobs. Why should they when they can play WS.

[LondonReign2]

44. Ok, I am going to have to play contrarian here

I do not disagree that the Dow topping 17,000 is an imperfect measure of the average American's financial health. As noted elsewhere in this thread, it does indicate that business is picking up and the job picture is improving, albeit not as rapidly or robustly as anyone would like.

Keep in mind that over half of American households own stock, either directly or through mutual funds. The number was actually much higher pre-Great Recession, though, at almost two-thirds of households. So a rising stock market improves the financial wellbeing for a majority of Americans.

And PE ratios are not particularly nuts right now, not by long-term historical standards. See the chart here http://www.advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php

[watoos]

59. Exactly. I worked for 42 years and saved some of my money

I've been retired for 4 years now, I was a union glassworker. Seeing the stock market rise helps my investments too. A growing stock market doesn't just benefit the 1% and the speculators.

[ClarkeVII]

24. I'm convinced

... That the #1 reason stocks have been doing so well are because interest rates are so low.

[moondust]

40. No doubt.

A lot of it is investors chasing ROI with CDs and savings accounts down around 1% or less. I'm not sure if the low interest rates were the fed's plan to boost home buying or boost the stock market; maybe both. Good way to create a bubble.

[90-percent]

26. The entire engine that drives Wall Street

The entire engine that drives Wall Street is based on buffaloing people by numbers. Nobel Laureates craft complex mathematical musical chairs bottled smoke and turn it into their bonuses. It is all the best corruption money can buy.

And now too big to fail is even bigger. Nice checks and balances we got these days!

-90% Jimmy

[ReRe]

28. Whoop-ti-doo

Manny, if you think Wall Street is doing good with @ 17,000, just wait till it crashes.

(I don't think that's sarcasm!)

[Jackpine Radical]

30. The crash is coming.

We're being set up for another big one. They will gut the meager safety provisions of Dodd-Frank, pass some nice secret international treaties that outlaw government regulation, & Katie bar the door!

[winter is coming]

36. Yes, it is. The only question is whether it will arrive before Election Day. n/t

[ReRe]

37. I hope you're wrong...

... but I fear you're right.

[MannyGoldstein]

33. Just like the doctor when the patient dies... nt

[Ed Suspicious]

31. That's why the wanted so badly to move us to

401k retirement plans. It was to get us to buy into the idea that corporate profits are a fantastic thing. Our retirements depend upon a company's ability to pay shit wages . Yay capitalism! Yay ownership society!

[BuelahWitch]

34. BOOM! You got it!

I was skewered earlier this week because I objected to having to opt out of a 401K that my company signed me up for automatically. I'm glad I'm not the only one who feels that way about them.

[neverforget]

60. wish I could recommend this comment!

k&r

[IronLionZion]

38. What exactly are you doing to help the situation?

[Jenoch]

39. I do not believe that the

Dow Jones Industrial average is a good indicator of how the economy is doing for most Americans, despite what our Democratic political leaders are saying.

[moondust]

41. You need a graph.

Plotting the DJIA over the past ~50 years and the disappearance of good-paying middle class jobs.

[WinkyDink]

42. They ensnared us when our retirement/pension accounts were invested.

[truth2power]

46. Prof. Richard Wolff has addressed exactly this issue...

It's absurd to look at the stock market and infer that we're in some sort of economic recovery, because the majority of stocks are owned by those in the upper income groups.

[malthaussen]

47. The DOW is like the Batting Average.

As any devotee of Sabermetrics will tell you, BA is almost useless in evaluating the worth of a player. But it's a simple, flashy stat that impresses the marks and inflates the paychecks of players who can get on the right side of it.

-- Mal

[pampango]

48. True. The stock market tripled (up 260%) in FDR's first term, but that was not the indicator

of the economic well-being of Americans.

President Franklin D. Roosevelt won an overwhelming re-election in 1936 based on the strength of an economic recovery underway since his 1933 inauguration. As he began to lay out a second-term agenda in the spring of 1937, it was easy to see signs of that recovery. The Dow Jones Industrial Average (DJINDICES: ^DJI ) had risen 260% from Roosevelt's first day in office. Unemployment, which surpassed 25% in the first months of his presidency, had fallen to about 11% shortly after the start of his second term. The real corporate earnings of most large American companies had nearly recovered to their 1929 peak after more than doubling over the course of Roosevelt's first term, and real national GDP had grown as much in those four years as it had during the course of the entire Roaring '20s, surpassing its 1929 high-water mark before Roosevelt had even begun his re-election campaign.

http://www.fool.com/investing/general/2013/03/01/why-obama-might-be-the-next-fdr-for-the-stock-mark.aspx

[Yavin4]

49. The stock market is a reflection of the actions of the Fed. It's not tied into the overall state

of the economy. For example, when you read that the GDP is down, the market usually goes up. Why? Because investors know that the Fed will continue to pump money into the system to counteract the drop in GDP.

Fed rates, far more than tax cuts, is the single biggest reason for the 1% / 99% split.

[DesertDiamond]

50. During the Reagan years all they talked about was the GNP, the GNP, the GNP...

How high it was and how it was still growing. I though, Really?? If the GNP is so high then why are there no jobs? Why are the streets teeming with homeless people? If our GNP is so great, who's benefitting?

[heaven05]

51. true

especially the buffaloed part. Not surprising though with a sizable minority always voting against their own self interest EVERY local and national election.

[question everything]

52. Insurnace companies and pension funds and, yes, us, regular folks invest

in the stock market.

For those of us who were lucky enough to have had decent jobs through most of our working life, we are hoping to be able to retire thanks to our own savings. The ones lucky enough to have worked for companies that provide pensions, they, too, are dependent on a good performance by the stock market. Certainly many union pension funds are dependent on the stock market.

And for all of us who hope that our property insurance will come through when needed, who are weary about increasing in premiums a rising stock market will ensure the survival of our insurance companies.

Unless you live in a cabin in Montana, you are part of our economy. When the value of a company rise, it will hire more workers. Mostly, with our service based economy, meaning an economy that is dependent on us "shopping," the rise in the stock market instills confidence and more of us go "shopping."

[Warpy]

53. I see the market gains as a reflection of how horribly labor is doing

Even Hanauer gets it right, the ultra rich have only two choices: have a soaring stock market of equities earning relatively little (and risk revolution) or have a depressed stock market of equities generating a healthy return with a stable population who are not being driven to revolution.

That's the choice they faced at the end of the 20s. The ultra rich hated it, of course, there are few bragging rights to a smaller fortune even if it does generate more income.

[Doctor_J]

54. Here's what "seeing what you want to see" means

Sorry , don't mean to hijack, but I want to show how deep the denial is among the Swarm

In another thread on the greatest page, a GA Republican is quoted as saying we need Medicare for all. He lists the various drawbacks of the ACA, including

because the Affordable Care Act is built on the defective private insurance model, it will never be very effective or efficient.

And with no Affordable Care Act public option, insurance companies will take advantage of consumers. For example, in the Albany, Ga., area, there is only one insurance company available via the exchange, Blue Cross. Incredibly, rates there are higher than they are in Beverly Hills, Calif.

Then, right below that, a BOG member posts

Hope to see more support after the *horror* of the ACA covering the *poor* wears off!

1. Pundit says ACA is untenable
2. BOG member says, "See? Even Republicans support the ACA"

Doomed is what we are.

[defacto7]

55. Extremes in the stock market are a bad sign

not a good one. It doesn't matter if it's high or low. If the comparison between indicators is uneven and there are no adjustments that equalize the increases there is something wrong in the system.

Extreme highs in the market where jobs and wages are not following suit mean fake values. Fake value means when the crash comes, the winners are the highest in the food chain and the average investor and non investor take the hit.

Why are we still following the same failed routine over and over? Probably because we can't control it.

Just don't play the game.

[Spitfire of ATJ]

56. You just started to figure that out NOW???

[MannyGoldstein]

57. It was more of a public service announcement

(without guitars)

I did have an "Oh, duh" moment the other day, but not about this. Maybe I'll post it later so you can (legitimately) point and laugh.

[Spitfire of ATJ]

58. Looking forward to it.