The Disconnect Between Wall Street and Main Street
Dan NorciniFriday we witnessed something occur in the US stock market which to this trader epitomized the complete and total disconnect between Wall Street and Main Street America – a melt up in the US indices based on news from Wal-Mart that sales were not quite as bad as some had feared. On the basis of that news alone, the DOW made a nearly 300 point surge, closing at a new all time high. All around there was happy talk, back-slapping and high fives as “investors” rejoiced over the resiliency of the US consumer.
No where was there to be found the least bit of pause to examine the validity any such conclusion. Instead there was a blind panic INTO stocks.
Consider what is taking place in this nation. No matter where one turns, the US consumer is faced with rising prices for all the essentials of life, specifically food and energy needs. We have detailed the soaring price of basic foodstuffs on this site, namely wheat, milk and cheese, to the point of taxing our readers’ patience. In doing so, all we are pointing out is the harsh reality that the average family experiences every single time they visit their neighborhood grocery store. Do you remember when a weekly visit to the grocer costing $100 was considered expensive a few years ago? Nowadays most families count themselves fortunate to get out of the same store for less than $150; that is how much prices have increased.
When the Postman visits their abode and leaves his calling card in the form of bills from the local utility company, homeowners and renters are subjected to sticker shock as these same utilities pass on their higher energy production costs in the form of fuel surcharges. To add insult to injury the same folks are greeted at the gasoline pump with machines whose numbers seem to be spinning at high speed as the upper figure runs to the $60 level for a fill up.
“At least I have my house that is climbing in value”, the abused homeowner thinks to himself and finds some consolation in that thought. Sadly the local taxing authorities are also busy consoling themselves in the fact that they can now collect more property tax from that same homeowner due to the climb in the assessment rate. While the homeowner is perhaps “paper rich”, he must actually send real money into the local property tax coffers.
If that is not enough he sees his insurance premiums for both his house and his automobiles rising inexorably higher. Let’s not forget about his health insurance premiums and his prescription drug costs.
If the poor chap actually needs to do any repairs on his automobile or his home, heaven help him at that point especially if he has any children in college and has the honor of paying for books and tuition, not to mention room and board for his offspring while they are away.
The list goes on and on as we all know.
It would be one thing if in spite of these soaring costs his wages were rising just as quickly. He may not get ahead but at least he could keep his head above water. Tragically that is not the case for the vast majority of Americans. The simple truth is that that average citizen’s wages/salary are not keeping up with the rate of price increases for the essentials of life. His pay check simply does not seem to last long enough nor go far enough.
I ask you, how much intelligence does it take to realize that it is a mathematical impossibility for wages rising at 2%-4% to keep up with prices for essentials rising at 6%-10% or more? The average American is plunging further and further into debt in order to maintain what they surely must feel is an endangered lifestyle. Some are even tapping into their 401K taking the huge tax hit and penalties involved notwithstanding.
Meanwhile all of this is lost on the Wall Street crowd which continues feasting like the obscene toads that they are. It is obvious to me that the US stock markets have moved beyond the term “irrational exuberance” and morphed into what can only be termed madness. To read as I did yesterday the comments from some “analysts” that the consumer is “obviously unaffected by higher prices” as the justification for a 300 point melt up in the stock market was probably the final straw for me and served to confirm my worst fears – we are infected by a new generation of economic ignoramuses who are so far out of touch with reality that the only way to explain the disconnect is that their minds have been ruined by the use of hallucinogenic drugs.
Here is a bit of confirmation of the real world, which will undoubtedly be dismissed by the punch drunk investment world. It is however a report which is “logical” given what is taking place on Main Street, USA.
Your Well Wisher,
Dan