Here's a brief snippet to give a taste, but I highly recommend reading the article in its entirety, because Cohen describes the links between the equity markets, the dollar and oil prices -- and how they've effectively broken any semblance of links with the "real economy."
Published Sep 3 2009 by ASPO-USA, Archived Sep 3 2009The Almighty Dollarby Dave Cohen
What is hateful to you, do not do to your fellow man. This is the law: all the rest is commentary
—One version of the rule of reciprocity, the Golden Rule
I only hope that we don’t lose sight of one thing—that it was all started by a mouse
—Walt DisneyEach week I look at the economic and energy data. While there are indeed some actual green shoots in the monthly reports, I can not escape the feeling that our society is like Disneyland, a magic kingdom where life is a fairy tale and dreams really do come true. I call it Disneyland because the crazy rise in the S&P 500 and the oil price in recent months has happened despite, not because of, fundamentals in the economy.
The disconnect between the markets and the economy is almost total. The markets reside in a fantasy realm, while most of us must deal with depressing day-to-day realities. There will eventually be a downward “correction” in the markets, but only because there’s no avoiding the fact that reality always gets the last word.
SNIP...
Let’s sum up what life looks like in Disneyland—
* The S&P 500 “rally” is phony.
* Oil moves with the S&P 500, so the oil price is phony too. (See my Mr. Market Gets It Wrong Again.)
* We no longer live in a society that even bothers to pretend that things are on the up and up. The markets are manipulated in plain sight.
I don’t think this is what Adam Smith had in mind when he wrote about the miraculous powers of the “invisible hand.” Janet Tavakoli, founder and president of Tavakoli Structured Finance, explains whey she has liquidated almost all her market positions—
I just went to (almost) 100% cash in my favorite hedge fund, my personal portfolio…
On Monday, Austin Goolsbee, one of President Obama’s economic advisors, told The Daily Show’s John Stewart that the large deficit is necessary, TARP backed us away from the brink of disaster, and the stimulus is working. If only words were magic. Many more banks are in trouble, a chunk of housing activity is due to foreclosures/short sales/resales (the $8,000 housing incentive often went for down payments from people who couldn’t scare up one of their own), credit card problems are on the rise, one-quarter to one-third of all mortgages in the U.S. are underwater, the mortgage “modification” program is a failure with only around 200,000 done so far—half of which are already failing (the same fraudsters who got us in this mess are modifying mortgages), 3,000,000 mortgages are in serious default (90 days or more past due), the unemployment picture is grim, the cash-for-clunkers fake auto stimulus is a non-green short-term artificial pump-up, profits seem due to inventory management and cost cutting rather than demand, and industrial production has plummeted (other than military production which is up). More TARP money will be needed for many smaller banks that are in trouble due to current and coming loan losses. The international picture is mixed, but I’ve even liquidated those positions.As Ms. Tavakoli knows all so well, we are in a giant game of Survivor. You’re on your own. If you’re skillful & lucky, you might not get kicked off the island. The Revolution will not be televised. In fact, The Powers That Be have postponed The Revolution indefinitely. They hope you will enjoy watching re-runs of Friends or Seinfeld instead, assuming you still have a roof over your head and you can still pay your exorbitant cable TV bill.
READ THE REST HERE