Thursday, February 23, 2012

Dow 13,000: April 2007 vs Today

~ April 23, 2007 New Yorker

Today it looks like the market will reach the 'magic' 13,000 mark, or at least tease it.   Shouldn't be a surprise to people to see the Dow so high yet the everyday economic conditions for most people deteriorating when you realize the Fed has pumped $7 Trillion into the US markets specifically (not counting the Trillions given to corporations and foreign banks) since 2008

And because the term 'trillion' gets so diluted in its meaning when its spoken of repeatedly, here's a very brief reminder of what a trillion dollars looks like:

$7,000,000,000,000  --  A '7' followed by 12 zeros 

If the Fed had chosen to spend $7 Trillion dollars to bail out the American people instead of banks, financials, corporations and the stock market, every man, woman and child that make up the 310 million population, would have received $22,580 each.

Talk about Really stimulating the economy..

But let's move beyond that...  let's do a little time travelling, back to when the stock market hit 13,000 for the first time ever (April 25, 2007) and do some compare/contrasting to see if things are truly better or not...
~ April 23, 2007 cover: JaMarcus Russell turned into a Big star didn't he?
* Unemployment rate in April, 2007 was 4.5% with 6.8 million people without jobs.  

In January, 2012, it was 8.3%.  

Let's pretend for a moment the Bureau of Labor Statistics didn't purposely fudge the numbers by counting those given up looking for work as not unemployed, 'officially' 12.8 million Americans are out of work, an increase of 6 million people.

* Housing starts (building of new homes) was at 211,900 for April, 2007.  

In January, 2012, the number was 197,900.  

So 14,000 less homes are being built even though the US population grew by 8 million people in 4 years (302.2 mil people in '07; 310 mil. people in '11), and interest rates kept artificially low for an insane period of time.

* Consumer Confidence in April 2007 was listed at 106.3.  CNN/Money at the time described the prevailing mood as "consumers shrugged off record high gasoline prices and falling home values, focusing instead on gains in the stock market and a strong employment picture."  

January, 2012, Consumer Confidence was 61.1, which was down from 64.8 in December, 2011 and overall down a whopping 45.2 points from April, '07.
~ Time magazine US & Global cover, April 23, 2007 - pathetic I know...

* National average for gas price in April, 2007 was $3.11.  

Today it is $3.59 according to Consumer Reports. 

Filling a vehicle with 15 Gal/week for 52 weeks in April 2007 would have cost a driver around $2,425.  Today if prices stayed as they are for a full 52 week year, the driver would pay around $2,800, an increase of $375  There goes that payroll tax cut savings...

* Average home price in April 2007 was $311,700 according to the Census bureau.  

 As of October, 2011, the average home price was $242,300, a drop in value of $69,400!! (22%) in a span of only 4.5 years.

I think you get the point...

So when you hear the media trumpeting terrible statistics as progress or 'recovery', try to put things in a more proper perspective..

And don't be celebrating Dow 13,000 too hard...
~ Amazingly, this was the cover on April 23, 2007, 18mths before election

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