Above are the charts for Dow components Home Depot and Disney for the last year. Both have been in a very controlled, low volatility, linear regression channel during that period of time. When I say controlled, I mean manipulated. Manipulated by whom? I don't know specifically. Whatever hedge funds, mutual funds and trading desks at Wall Street banks own and are manipulating the stock's low volatility, channel-driven rise. During the last year both of these stocks have just about doubled. So, did something happen to Disney and Home Depot so in the last year the intrinsic value of these companies has doubled? During a period of obvious depression, no job growth and when government and the Fed have spent over $30 trillion propping up the Humpty Dumpty economy and financial betting parlor they created.
During the Dow rally over the last year, these two firms have contributed about 20% of the rise in the Dow. Add in Chevron and Exxon Mobil and those four companies have contributed about 40% of the rise in the Dow. Four stocks. That's also a sign of manipulation/market distortion enabled by the Fed. That only four companies comprise such a large percentage of the Dow's move is a sign of the sickness that plagues U.S. financial markets. Is that it? Seriously? High energy costs, real estate and consumer spending in the dystopian corporate state? That's what led to the collapse in 2008. And, of course, since the government did nothing to fix the economy or deal with prior crises, we should expect the same schemes from before 2008 to be the same schemes in 2012 - energy, real estate and consumption - all act as a tax on society's wealth. But this is the Ponzi economy our politicians have enabled for their corporate masters. Our economy doesn't reflect what we need but rather reflects what looters wish it to look like.
The Dow is up about 25% in the last year. Think about that. The Dow has been around for what? About one hundred years? So, according to the market price of the Dow, the wealth of our nation from the last 99 years has grown by 25% just in the last twelve months. And, if we go back to the 2009 lows in the Dow, according to its market price, the wealth of our nation that took 97 years to create, as measured by the Dow, has since doubled. Then before that, as measured by the Dow, our wealth doubled from 2003 to 2007 while creating a massive debt, finance, consumption and real estate bubble. Then before that, our wealth tripled from 1995 to 2000 in the technology/Internet bubble.
Hahaha. Sorry, I had to take a potty break. I just soiled myself from laughing so hard. It is quite arguable that there is no bigger Ponzi scheme anywhere than the U.S. financial markets. Truly.
Curiously, a week and a half ago, my remarks about the Fed's easing announcement included this statement. The only U.S. equity market index that matters right now issued a sell signal yesterday and is weak again today. (The day of and the day after the Fed's announcement of QE3.) Well, in the week that followed, last week, that index, the Dow Transports, had a mini crash and sold off the equivalent of 800 Dow Industrial's points. In one week. Last week. Not a bad call on the sell signal. The Dow Transports are at the same level they were nearly two years ago. Anyone who follows Dow Theory is obviously very aware of this dynamic.
A reminder. I have remarked quite a few times over the years that the U.S. stock markets could go away. Forever. I'm sure most people don't really believe that is possible but every institution of the ego or institution of man eventually fails and disappears. The stock market that exists today serves little purpose other than to loot society as I have noted countless times on here. You know, by those take-charge, personally-responsible kleptocrats like Mitt Romney's friends in finance and private equity. In one of my next few posts we'll take an updated view at the possible coming disappearance of U.S. equity markets.