Why It Might Not Matter

Equity markets are sliding hard to start month 2 of 2014, it might not be as bad as some think but the reason would make you warm and fuzzy. There no longer is an aspiring (over reaching) middle class to be damaged by the fall. The reason the POTUS message is not resonating is because the middle of the US has evaporated. The SOTU mention of 124k for the MYRA threshold exposed the ruse.

The reconstruction of the financial system through Fed tool box innovation enhanced only modest growth behind stellar market performance. The "middle" was left to side with the capital holding top or quietly join the other side. The economic chasm of QE was too wide to straddle. As a mentor said to me last week after traveling, "Its almost like a stealth depression behind the level of the S&P."

Hot money is tossing the prices around to start 2014 but we doubt it changes the actual economic course. Slow to moderate growth and defensive posturing until after the Olympics (as we highlighted in our 2014 surprises note). The weather is beating down attitudes across much of the populated geography but the groundhog could have gotten it wrong. So take heart, the rout in capital markets is coming from a point of mega-elasticity between prices and activity. The people that would be most effected by it, the "Middle Class", don't exist anymore.

2 thoughts on “Why It Might Not Matter

  1. Lawrence Martin

    U r so right on .. I’ve tweeted the following factoids b4 but they may be apropos in the context you hv setup here: Current income equivalent to 1971 Median Family Income (MFI) > $450K (maybe more taking into account income tax implications compared to 1971) : Zirp has taken an incredible toll on peeps who have built liquid cash saving pools over the years; > $500K lost income (an actual middle-class person that I know) over a decade of low to zero int rates (Bush and Obama); this is $500K that might have filtered into the econ thru ‘traditional’ means.

    Oh, I forgot. This has been a ‘Managed’ crisis ….


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