DOW Enters Record Territory Boosted By Quantitative Easing – Yes, This Is A Bubble

March 5, 2013 12:11 pmViews: 839

All time high dow stock bubble

While CNBC types are dancing happy because of a record setting DOW Industrial average, there are many signs that all is not well in the economy. For some, a record setting stock market is all they need to know as an indication that the economy is on the upswing. That is certainly the perception the main stream media and President Obama would want you to believe. Unfortunately, stocks are only a single indicator that can easily be gamed as is happening now.

Back when Helicopter Bernanke decided he would use quantitative easing to pump $85 billion a month into the economy by buying mortgage backed securities to keep interest rates low, most of that money ended up in the stock market in an indirect way. By keeping those interest rates low, seniors and others looking to save for retirement choose not to put their money in the bank or in to money market funds or certificates of deposit, but instead they turned to other non-interest bearing investments such as, you guessed it, the stock market.

Instead of the savings rate of the retired American public going up, we n0w have the stock market going up bolstered by that $85 billion a month QE by the Federal reserve. For those that still think it is a good thing to have a high, record setting stock market, let's have a look at some major differences in economic indicators between the last time the DOW was at record territory, October 9, 2007, and this time.

Courtesy of, here are a few of the differences:

  • Dow Jones Industrial Average: Then 14164.5; Now 14164.5
  • Regular Gas Price: Then $2.75; Now $3.73
  • GDP Growth: Then +2.5%; Now +1.6%
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
  • Labor Force Particpation Rate: Then 65.8%; Now 63.6%
  • Consumer Confidence: Then 99.5; Now 69.6
  • S&P Rating of the US: Then AAA; Now AA+
  • 10 Year Treasury Yield: Then 4.64%; Now 1.89%
  • EUR vs USD: Then 1.4145; Now 1.3050
  • Gold: Then $748; Now $1583
  • NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares

As you can plainly see, we are in a completely different economy than we were back at the last stock market record level of 14,164 back five and a half years ago. Yes, this is a bubble. Hold on to your hats.

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