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We’re only at midweek, but traders are celebrating on selling floors around the world as the leading indexes continue to rise to lofty and, in some cases, record highs.
The Footsie 100 closed up 35.8 points yesterday to reach its highest point since December 2007. The Nikkei Index broke past the 14,000 mark to 14,180 reaching its highest mark since June 2008. The DAX 30 closed at a record of 8,181.78, and in the U.S., the Dow Jones closed over 15,000 for the first time in its 117-year history at 15,056.20, whilst the S&P 500 and the NASDAQ composite also continued their ascent. Key indexes in Australia, China, and France all showed gains.
No doubt, some savvy investors have made some significant money during the markets’ rise from the collapse of the global economy in 2008 and 2009. USA Today pointed out that, if someone had bought stock in the Las Vegas Sands hotel in 2009, they should be a happy camper today. At $56.77 a share it is now 41 times higher than it’s barely-alive price of $1.38 four years ago.
So, why is it that whilst many execs are toasting with champagne and traders are raising a pint, the hard-working Joe at the end of the bar is still crying in his beer, just like the whole crowd was in 2008 and 2009?
Let’s think that through for a bit. Joe can’t buy a new home because, despite the schemes to get banks to step up lending, the banks have tightened their lending guidelines to the point where to issue a loan, they must have a signed-in-blood guarantee that they will get their money – or Joe’s first born – back. Then there is the issue that, whilst most segments of the global economy are recovering, Joe hasn’t seen a wage increase in five years, yet every time he goes to the grocery store or to put petrol in the car, the prices keep going up. Joe’s only consolation is that his neighbor, Ian, doesn’t have a job at all since he was terminated along with several hundred others so that their company could trim the fat to operate more efficiently. That’s right, Ian now looks at himself as a piece of fat. He’s depressed because nearly every place he tries to apply for work has trimmed its fat too, so they don’t need any more. But I digress.
The problem is that the recovering economy has not yet had a positive effect on Joe. He’s trying to figure out how to pay his bills with the same wages he made five years ago, whilst he has watched the price of everything that his family needs go up . He knows that executive bonuses are outrageous, even though they are sometimes deserved. But he also knows that the execs at his company didn’t make things happen all by themselves. He thinks that it would be nice if just a pittance would trickle down to his paycheck. If just half of the £6 million in executive bonuses would have been paid to the 1,800 employees, it would have put £1,666 into each of their pockets. Yes, Joe and the bonuses are fictional, but somewhere out there, there is a Joe who will no longer be crying in his beer, simply because this will be the last beer he can afford.
I am thrilled and excited to see the economy improving. I just think that until it trickles down to the point where Joe can get back on his feet, it’s a wee bit early to be rejoicing.
