Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom.

[Rajiv]

Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom. The Overly Expensive Mortgage Deduction, Wall Street Pseudo-Rally, and Attacking the Poor.

Last week the S&P 500 almost reached an impressive 80 percent gain from the red abyss seen in March of 2009. This puts this stock market rally up in the ranks of the strongest and fastest market turnarounds in history. Yet on Friday news of Goldman Sachs betting on toxic mortgages sold to clients brought the market down as the SEC has finally decided to bring a civil suit forward. Only took a full 27 months of the obvious. The case against Goldman Sachs is a good representation of what our stock market has become especially when it comes to financial institutions and their gaming of the system. Here you have a firm pushing toxic mortgage securities to their own clients yet at the same time, another division of the institutions is betting against the pool of securities because they know that it is junk. This is the story of the current financial system. What use is this really providing the market except enriching the most corrupt and elite financial institutions in the world?

It is fitting that on the same week of the 80 percent rally point, we find out that last month the U.S. saw the largest number of foreclosure filings on record. We also had many states, including the largest with California announcing a new record unemployment rate of 12.6 percent. Do we need more evidence that the stock market does not reflect the health of Main Street? And people act shocked. This is what happens when you inject $13 trillion into the financial sector on the backs of the American public.

Take a look at the power of this stock market rally:


Source: Chart of the Day

The 1932 stock market rally came after an 89 percent stock market collapse during the bottom of the depression. The 1942 rally came because Europe was bombed into oblivion during World War II and we were producing war goods like crazy. Those models don’t seem to apply today. The NASDAQ collapse is similar to the 1932 chart in that it fell approximately 80 percent from the peak. Today, the stock market is only off by 24 percent from the massive bubble peak achieved in 2007. Yet what has changed? Not much actually in terms of the real economy. Unemployment is still near the peak. We have 40,000,000 Americans on food stamps. Another 15 million are unemployed and another 9 million are working part-time but would like full-time work. This is not a recovery but a clandestine embezzlement of wealth from the overall public, to a select few that are directly linked to Wall Street.

The above information only adds fuel to why 13 percent of the population thinks the economy is doing well:



Let us examine three ways the rich are enjoying the stock market rally while the overall economy is still mired in the pangs of recession.

Top 1 Percent Control 40 Percent of Financial Wealth

The first obvious reason for why the public is not feeling the enjoyment of the stock market rally is most Americans don’t derive most of their income from stocks:


Source: William Domhoff

We have been bamboozled into believing that wealth is the person who has the most cars or the biggest homes. But that is not necessarily true. Many Americans bought homes that were too big with even bigger mortgages and many have lost those homes. Many have been deceived that wealth is the person that drives the nicest car even if they live in a tiny 500 square foot apartment to pay that enormous lease. True wealth is the actual power base of any economy and that comes from savings (i.e., capital stock, bonds, cash, etc). And financial wealth is the absolute nucleus of power. In the U.S. the top 1 percent control 42 percent of all financial wealth. In other words, this 80 percent stock market rally only applies to the absolute tiniest segment of our population.

That is why even after a near 80 percent stock market rally, the vast majority of Americans have no faith in the economy. Why should they? Most of those profits were brought by firing workers or squeezing productivity of those currently working while wages remain stagnant. Yet this is somehow a recovery? It isn’t and the fact that only 13 percent think things are good is a reflection of this new darker economic reality.
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[cjppjc]

Re: Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom.

Enjoyed the commentary very much. Thank you Rajiv. I do happen to agree with this statment however.

unemployment insurance keep people unmotivated from looking for work.

[yernamehear]

Re: Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom.

All of the hand wringing about the disconnect between main street and wall street is amusing. Have a look at the 1932 rally. The conditions of the disconnect there are obvious and larger than now. That's often the way financial markets work.

I hope people made some money on this predictable stock market rally. It's a cyclical one (what Dr. Hussman would call "non-durable"), but can be profitable, and has been for some of us.

Don't confuse the markets with the real economy. They are only partially correlated, and often with time lags.

I expect more volatility for the rest of the year with a significant cyclical bear prior to year end. 2011 may be hard. 2012 will be manipulated for election purposes, just like presidential election years always are.

[Rajiv]

Re: Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom.

unemployment insurance keep people unmotivated from looking for work.

In a manner of speaking possibly. However -----

Firstly, the amount of money tha UI gives is much smaller than what was being earned before. So the motivation is there to look for appropriate work. It gives you some breathing room, and allows you to not look for jobs that are inappropriate for your qualifications.

But in a job market, where jobs are not coming back, and are being rapidly out sourced, this leads to extended periods on UI and you could be right in that situation -- but it (UI) does serve a rather diabolical purpose -- It prevents the "hoi polloi" from revolting against the PTB.

[cjppjc]

Re: Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom.

So the motivation is there to look for appropriate work. It gives you some breathing room, and allows you to not look for jobs that are inappropriate for your qualifications.

He he

Appropriate = well paid, nothing else.

Maybe this is why I am so often inappropriate.