Dow: 10,000 To 5,000?: The “FUBAR Bubble” (Oct. 12, 2009)
“Ten thousand. And they say the good times are rolling. ”
“It’s just another bubble. We uploaded the ‘dot.com bubble’ and then constructed the ‘real estate bubble.’ Now the Republicans and Democrats in an ironic act of unintended bipartisanship are inflating the ‘FUBAR bubble’ which will only inflate the economy and precipitate a sustained jobless Depression. Combine unaccountable spending by Congress and unacknowledged spending by the other Congress, the Federal Reserve, and you create the ‘FUBAR bubble.’”
“How can everyone forget in a year? I don’t know what to do with my money. Everyone is dumping their money back into the market. It’s tempting. What else do you do?”
“I don’t know what to do. Remember that no one wants to remember something negative, so one simply does not remember. All the federal borrowing is not even ‘crowding out’ private investment because there is no real private investment in anything productive. Most of the reported corporate profits are either federal money infiltrating the economic system temporarily or savings resulting from cost cutting not expansion. Jobs are being slashed to slash costs that ends up costing the economy. Add a Trillion dollars of uncollectable credit card debt and the coming commercial real estate collapse to the scenario and the scene gets ugly.”
“What about deflation? No one has a job. No one has money. No one can buy anything. Oil prices are down. Copper prices are down. Aluminum prices are down. Prices will go down?”
“Down plus down plus down plus down plus down does not seem to add up to up. I’ve watched the slide. Yet people spend and consume. They need to eat and wear clothes and clothe themselves in a house and acquire that most elusive good – status. There are boatloads of money floating around out there and no limits on personal credit. However, there are not enough goods to acquire. The government can print bread (money), but it cannot print bread.”
. . .
“The Fall of 1999 seemed so blissful. There was a feel and the smell of easy money in the air. And talk of a 36,000 Dow. That bubble was made of thin air. What was in the water?”
“Everyone was giddy; I was uneasy. I have not been able to share in all the excitement. We were raised to believe that a P/E (Price/Earnings) ratio of 12 is desirable, 16 is tenable and 20 is tenuous. The share prices were huge and there simply were no earnings and no real prospects for earning.”
“Those were the days.”
“Even I got caught up in a calculated slice of it. Can you imagine if a person could have ‘shorted’ the entire United States economy in October, 2007 when the Dow/Murdoch hit fourteen thousand? Someone could have made one trillion dollars and then bought Congress and cleaned up the mess. The dot.com collapse was largely benign because it immediately impacted those who had ridden the rise which contained the consequences. The continuing real estate collapse is having much more sustained and pernicious impacts because it is a steady and slow burning fuse. The ‘FUBAR bubble’ is breaking the economy. The ‘Federally Underwritten Bankruptcy of the American Republic’ is the last bubble. There is nothing left to stimulate.”
[See the “e-ssay” dated Dec. 4, 2006 entitled “When The Bubble Burst” addressing the relatively modest consequences resulting from the decline of the “dot.com bubble” and the troubling and continuing impact of the collapse of the “real estate bubble.” See the “e-ssay” dated July 23, 2007 entitled “The Dow Jones (the Murdoch?) Hits 14 K In A Hollow Economy” discussing the stock market on the edge of a precipitous collapse.]
Bumper sticker of the week:
Please, just give us just one more run up and we won’t blow this one.