What kind of an economy is it when the stock market rallies when more people are unemployed?
This is how it goes:
1. The unemployment rates as published by the United States government are woefully too low, intentionally made so for political reasons. These rates do not include underemployed and people who have given up seeking work. Significantly, there is no measure currently available to determine who lives in fear of losing their job and brings that fear home each day to pollute their families, their sleep, their lives.
2. None of that matters to Wall Street since, in the parameters of stock market investing, higher unemployments means that the Federal Reserve is not likely to raise interest rates since to do so would likely lead to further business contraction (not being able to borrow or having to borrow at higher rates) and thus lead to further unemployment.
3. So as a result, the higher the number of people without work, without meaningful work, living in fear of losing their jobs, the higher goes the stock market (all other things being equal). What is good news for Wall Street can be traumatic, life changing and disastrous for those who are unemployed.
4. In the ideal world, the real value of any investment would consider human values.
That's what I believe.
Copyright © 2008 Ivan Hoffman. All Rights Reserved.