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Between the GM "we hope to find some way to stay out of the grave" announement, and the Consumer Spending "we will spend more than we earn until someone stops us" data, investors had bugger-all to cheer them up. However they still generated a good hearty bounce (as I mentioned was likely well before the market opened).
Franchement, (as me and my Parisian chums say) the idea that the US indices (and global indices thanks to the baa-lamb effect) could rocket upwards based on this news, is an indicator that nobody thinks the music has stopped.
That's fine - it gives an opportunity to re-set shorts at improved levels. Even if you were a super-slowcoach and gave everything back except the 10 SPI points advocated as the stop, you still made out like a bandido - and those who took the 60 (or more if you exited first thing in the Oz morning) did significantly better. Nobody should have reversed (although a couple of e-mailers mentioned that they had done so - bien joué, as we Parisians say).
Have you taken a look at the US housing market lately? Man, does it ever look sick. And all the same store sales stuff that was released yesterday looks absolutely AWFUL. Falls of 10% year on year are not something to be taken lightly, and it was happening right from top-end retailers all the way down to CostCo.
I read something very interesting by Paul Krugman the other day - it pointed out that even among the top 10% of income earners (the ones who have pocketed all the gains from the so-called 'productivity miracle'), the outcomes vary wildly.
Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution (i.e., the top 10%) rose only 34 percent, or about 1 percent per year. (I think that's in real terms).
1% real income gains per year - better than the NEGATIVE growth in real income for the rest of the US, but read on...
Once you get to the top 1%, you find that income over the same period grew 87 percent (2.1% p.a.) - but it gets even better...
The top 0.1% income grew 181 percent (3.6% per annum); and income at the rarified "atmos" of the top 0.01% had their incomes more than quintuple (in fact they al,ost increased by a factor of 6, with a gain of 497% or 6.4% p.a.)
Krugman doesn't 'partial out' the gains of the stratospheric earners when calculating the gains for the 'rest' of the top 10%, either. Now anyone who has done 8 years of Econometrics can tell you that the overwhelming bulk of the dollar value of ALL gains experienced by the top 10% accrued to the top 0.01%. In fact if you assign numbers to the actual average income levels and so the numbers, it turns out that, on average, everyone below the top 0.1% went backwards.
And remember, that's in REAL terms.
I can't be bothered putting my "back-of-the-Excel-spreadsheet" calculations into a table to prove that statement, but if anybody wants to 'call' me on it I will do so at a later date. It's pretty easy to calculate. Just note before you try to countermand the idea, that the calculation is a little tricky... you have to get starting values for the 1972 incomes (easy enough using Krugman's estimates for the top tiers and reversing the growth), then you have to establish the annual aggregate income for each stratum, then you have to establish how much of each stratum's aggregate income per year is accrued by the stratum ABOVE it (i.e., for the top 0.1%, how much of the year's additional income went ONLY to the folks in the top 0.01%).
The original Krugman article is here...The end point is this" nobody in the US is getting richer except those who were mind-bogglingly rich already. EVERYONE else is going backwards (which is a good supporting anecdote to hepl explain the massive increase in DEBT in an environment of supposedly-increasing prosperity).
