"In 2013, there is absolutely no correlation between Main Street and Wall Street..."
"I really like Jim, but he always seems so disconnected." How many times have we heard that about some person. Right now the statement could be rewritten to say "I really like the economy, but it is so disconnected from my economic situation." For many people, reading the economic section of the newspaper is like reading about a distant planet. The rich are getting richer and the poor are falling off the economic map.
It seems like every day the stock market sets a new high. We can discuss the reasons for it - if it is due to a better economy or just a side effect of the Fed pumping zillions of dollars into the economy. I think it is a bit of both. The irony is now Obama is being credited for being in charge when we have had the largest stock gain in history. Nothing he has done to the economy leads me to that conclusion. The other irony is Bill Clinton is now in second place with the biggest run up in stocks during his term.
For those who are not invested in the market, here is the static reality. The jobless rate remains at around 14%. That means that one out of nine people in our economy remains underemployed or unemployed. In addition, many of the new "jobs" that have been created are service sector - lower paying and low or no benefits.
Housing is another indicator of the haves and the don't haves. If you are fortunate enough to own a house and be above water with your mortgage, the refinancing rates are other worldly. Many rates today are in the 2% to 3% range. If you are underwater and qualify for HARP rates, you can get new rates in the 3% t0 4% range. However, if you are underwater and do not qualify for HARP rates (still millions are in this category), you are stuck with a "white elephant". Worst case, you will lose your house to foreclosure; best case, when you will sell your house, you will take a bath.
The economy is growing on pins and needles right now. We still have the PIGS issue in the Euro Zone (Portugal, Italy, Greece and Spain) which many think is a ticking time bomb for us. In addition, while we are distracted with everything else going on, our debt clock continues to spin like a top. Neither party has the guts to really take this one on, so the thinking is our debt will top $20T by the time the President's term is up. The cost of servicing that debt using normal interest rates will take the wind out of any economic sail.
So if you have money in the market, enjoy it. Some "blue sky" economists think the Dow could rise as high as 20,000 before the correction comes. Remember the lesson from 2008 - what goes up, must come down. Or better yet, the bigger they are, the harder they fall.
For those who are not invested in the market, here is the static reality. The jobless rate remains at around 14%. That means that one out of nine people in our economy remains underemployed or unemployed. In addition, many of the new "jobs" that have been created are service sector - lower paying and low or no benefits.
Housing is another indicator of the haves and the don't haves. If you are fortunate enough to own a house and be above water with your mortgage, the refinancing rates are other worldly. Many rates today are in the 2% to 3% range. If you are underwater and qualify for HARP rates, you can get new rates in the 3% t0 4% range. However, if you are underwater and do not qualify for HARP rates (still millions are in this category), you are stuck with a "white elephant". Worst case, you will lose your house to foreclosure; best case, when you will sell your house, you will take a bath.
The economy is growing on pins and needles right now. We still have the PIGS issue in the Euro Zone (Portugal, Italy, Greece and Spain) which many think is a ticking time bomb for us. In addition, while we are distracted with everything else going on, our debt clock continues to spin like a top. Neither party has the guts to really take this one on, so the thinking is our debt will top $20T by the time the President's term is up. The cost of servicing that debt using normal interest rates will take the wind out of any economic sail.
So if you have money in the market, enjoy it. Some "blue sky" economists think the Dow could rise as high as 20,000 before the correction comes. Remember the lesson from 2008 - what goes up, must come down. Or better yet, the bigger they are, the harder they fall.
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