A Terrible 5 Years, So What’s Up with the Dow?

Today chief executives worry, companies hoard cash, uncertain fragility and fragile regulation haunt our banking system, and recession continues, with gas prices up, GDP growth down, unemployment up, government debt and size up and political leadership not showing the ability to come to grips with any of it.

Yet the Dow Jones Industrial Average yesterday matched a level not seen since October 2007, a few months before the current crisis showed up.  Believers in the efficiency of stock markets will take this as a sign of good times ahead, believing that markets reveal better than anything else the truth about business fundamentals.  Skeptics will plan to cite this as the first sign of a bubble.  Some highlights, then and now:


Dow Jones Industrial Average: then 14164; now 14164 

Regular Gallon of Gas: then $2.75; now $3.73

GDP Growth: then +2.5%; now +1.6%

US Unemployed: then 6.7 million; now 13.2 million

Americans On Food Stamps: then 26.9 million; now 47.69 million

Size of Federal Reserve (assets): then $890 billion; now $3.01 trillion

US Debt as % GDP: then ~38%; now 74.2%

US Deficit: then $97 billion; now $975 billion

US Government Debt: then $9 trillion; now $16.43 trillion

US Household Debt: then $13.5 trillion; now 12.87 trillion (the only bit of good news listed yet)

Consumer Confidence: then 99.5; now 69.6

US Credit Rating: then AAA; now AA+


Hat Tip: Whitney Tilson, at Value Investor Insight Newsletter, who in turn credits Zero Hedge as the source.

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2 Responses

  1. Peter says:

    Great post. Cheap money from the Feds plays a big role. With near 0% interest rates the speculators, hedge funds and banksters have had a nice line of credit to play with, which clearly is reflected in the Dow’s “value”. Investigating the role of margin calls would also be interesting here. The Dow has pretty much lost any predictive value in terms of the US economy and the financial state of the 99%; turns out it really just is a casino for the uber-wealthy.

  2. Aaron Saiger says:

    The increase in the use of food stamps is staggering, and much less well publicized than the increase in unemployment.