We got the funk!
I keep reading all the reasons the pundits make for why the economic data shows we are in a recovery but the stock market is in a decline. My reason is as good as anybodies: We got the funk!.
Funk is a state of depression and that seems to be what the country has lately. Nothing seems to be going right. It's not any one reason, it's just a series of bad news reports that seem to have a cumulative effect, so we got the funk.
The housing market is in the toilet - that's the only way I can describe it. I just returned from south Florida and news reports there say that over 50% of the homes are under water. I talked to a guy that thought he had a bargain dream home that he bought just 5 years ago for $200K. It's 1,000 square feet, 3 bedrooms, 2 baths on a 125 x 125 foot lot. Houses in his neighborhood are all being listed for under $100k and banks have had some short sales for between $45K and $75K. He doesn't feel good about his investment.
The news in the Gulf of Mexico just keeps getting worse. No sign of getting the well getting plugged soon. Ask 3 engineers and you get 5 estimates of the potential damage. You would think that some bright 10 year old math whiz could figure out that given the viscosity of the crude oil, the pressure of the well the week before it blew and the 21 inch pipe diameter that X gallons are coming out of that pipe but no one seems to agree on the figure. Add the fact that people along the Gulf that have become unemployed are saying the BP is hiring outsiders to do the clean-up jobs not the local unemployed. Sounds like what happened after Katrina hit them a few years ago.
Obama and the tree huggers keep telling us how many green jobs are being added to the economy through alternative energy and conservation efforts. Has anyone told them that for every job created in the green sectors there will be lay offs in the fossil fuel industries?
Speaking of the jobs numbers the news isn't bright here either. Just think how many new graduates that can't find jobs are not counted as unemployed because we only count those that lost jobs not those who are looking for new jobs like recent graduates, retirees who's investments have tanked and have to go back into the labor force or spouses who are coming back into the labor force because the supporting spouse lost a job.
Interest rates are staying low and that is hurting a lot of retirees who seem to flock to insured CDs and T-bills. With 5 year CDs at 2.78% and the 10 year Treasury at 2.93% a retired couple needs almost $2 million dollars to get $50K a year not including taxes and inflation. How many retirees have $2 million? Not many.
The small business people I know that want to expand say the banks won't give them the money to do it. Banks are cutting lines of credit and even pledging your house and first born child is no longer good enough.
On this 4th of July I'm still proud of our military even with all those in Washington who never served a day in the military who some reason think they know how to run a war. We haven't won a war since WWII except for our successful invasion of Granada. Wouldn't you love for Obama to say: "Full speed ahead, damn the torpedoes and get Bin Laden and destroy the enemy at all cost!"? Right now our military is only making Afghanistan a safe haven for the poppy growers. I think along with the count of the military casualties we should publish the count of how many of our youth are dying or destroying their lives from the products of Afghanistan poppy fields.
With 401K, IRA and home equity values tanking and no return on your safe investments, much less your aggressive ones do you feel depressed? Even if you're set, how does the news of your kids or neighbors getting laid off brighten your day. Even teachers, police, fireman, EMTs and city and county workers are getting the ax.
So my idea on what's wrong with the stock market: We got the funk! My reason is as good as any economists reasons.
I got the funk. How about you?
Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.
Disclosure: No positions in the stock mentioned at the time of publication