The Great Economic Recovery of 2009 Is a Fraud

The Great Economic Recovery of 2009 Is a Fraud
By Jeff Clark
August 27, 2009

The stock market has gotten way ahead of itself. Investors are banking on a booming economy to keep the party going. But the gains are just temporary. And when it ends, it's going to end badly.

Of course, writing that sort of thing nowadays is like spitting on Santa Claus. Everyone knows the jolly old man in the red suit is a fictional character. But nobody will tolerate mistreating him.

And so it is with the economy. Most folks realize the pickup in leading economic indicators and the momentum behind the stock market's gains comes as a result of the government throwing trillions of dollars into the system.

It's not a real demand-driven economic boost. But pointing that out could get you branded as a Grinch.

The economic bulls are convinced the stimulus package is working. And depending on how you look at it, it is. Whenever the government throws a few trillion dollars into the economy in a few short months, it's going to create a temporary pop higher. But "temporary" is the key word.

Home sales today are higher this month than last, but way lower from this time last year. Auto sales have picked up due to the "cash for clunkers" program. But all that has happened is we've pressed next year's auto sales into this year. And the pickup in nearly every other consumer durable product is due mostly to restocking depleted inventory levels.

In order to gauge the strength of economic activity, it's better to look at the action in the Baltic Dry Index. This index tracks the price it costs to ship a variety of commodities overseas, and it's one of the most reliable economic indicators available anywhere.

Here's the chart...

While the index is well off the bottom it hit back in December, during the depth of the recession, it is still more than 60% below where it was one year ago.

Maybe a few trillion dollars doesn't buy what it used to.

More worrisome, though, is the recent downdraft since the peak in June. Better than anything, this illustrates the temporary nature of the economic recovery. The index has retraced nearly all its price gains since March.

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If the economy were truly in "recovery" mode, and if consumer demand were truly picking up, the Baltic Dry Index should be moving consistently higher.

It's not. And that fact should be a major warning sign for anyone buying stocks and betting the economy's current blip higher is sustainable.

Best regards and good trading,

Jeff Clark

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Learn how Washington D.C. has set America on the path to financial disaster.

•	Homebuilders rebound... D.R. Horton, Pulte, Lennar at 10-month highs, NVR up more than 40% in two months.
•	Corporate bonds continue amazing recovery... giant bond fund LQD at a 52-week high.
•	"Bailouts for everyone" working for municipal bond investors... loads of muni-bond funds at new highs.
•	Green power giant First Solar heads back toward three-month lows... down 35% since June.

	Last	Change	52-Wk
S&P 500	1028.12	+0.01%	-19.14%
Oil (USO)	36.95	-0.59%	-60.65%
Gold (GLD)	92.79	+0.03%	+14.23%
Silver (SLV)	14.09	+0.36%	+4.76%
U.S. Dollar	77.97	+0.49%	+4.96%
Euro	1.43	+0.20%	-2.98%
VIX	24.95	+0.12%	+21.77%
HUI	352.89	-1.44%	+3.64%
10-Year Yield	3.44%	-0.01	-0.31

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Company	Sym	Industry
Nektar	NKTR	pharma
Align Technology	ALGN	medical devices
NewMarket	NEU	chemicals
Copa Holdings	CPA	airlines
Aeropostale	ARO	clothing stores
Dollar Tree	DLTR	dollar stores
Veeco	VECO	semiconductors
Telvent GIT	TLVT	business services
MedAssets	MDAS	health IT
Tech Data	TECD	computers
Human Genome	HGSI	biotech
Lubrizol	LZ	chemicals
ASML	ASML	semiconductors
Atlantic Tele-Net	ATNI	telecom
Broadpoint Gleacher	BPSG	broker
Capella Ed	CPLA	for-profit ed
Aixtron	AIXG	machinery
Chico's	CHS	clothing stores
Manpower	MAN	staffing
Cognizant	CTSH	business services
Clearwater Paper	CLW	paper products
Valassis	VCI	marketing services
Piper Jaffray	PJC	asset manager
Old Dominion	ODFL	trucking
Del Monte Foods	DLM	packaged foods
Cree	CREE	semiconductors
Bed Bath & Beyond	BBBY	home furnishings
Multi-Fineline	MFLX	circuit boards
Blue Nile	NILE	online jewelry
Cymer	CYMI	semiconductors
MFA Financial	MFA	virtual bank
Bally	BYI	casino games
NVR	NVR	homebuilder
Stein Mart	SMRT	clothing stores
Schweitzer Mauduit	SWM	paper products
Netlogic	NETL	semiconductors
Gymboree	GYMB	children's stores
Emergency Medical	EMS	medical services
Elbit Systems	ESLT	defense
Western Digital	WDC	data storage
Jos A Bank	JOSB	clothing stores
Evercore Partners	EVR	asset manager
athenahealth	ATHN	business services
Rambus	RMBS	semiconductors
Inverness Medical	IMA	medical devices
Micron	MU	semiconductors

Company	Sym	Industry
Hampton Roads	HMPR	bank
First Merchants	FRME	bank
HUGHES Telematics	HUTC	telecom

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