Misguided celebration

Many pundits and world-renowned experts continue to celebrate the stock
market rally as a sign of the return of consumer confidence. They want
us to naively believe that the United States economy is quickly
recovering and well on her way back to financial and economic power
status.

This is far from the truth and any sense of reality.

The big “dumb” money (as many Wall Street traders glibly refer to it) — institutional investors such as state pension funds and private insurance pools — could not survive on the near-zero interest rates they earned on public debt, and were forced back into the street. Their actuarial models, the means by which they paid claims, assumed risk-adjusted returns averaging between 5 and 8 percent. They were now earning less than 2 percent.

Not only had they lost upwards of 40 percent of their capital in the downturn, but the anemic, jobless recovery, combined with the retiring baby boom population, placed serious strains on their resources. This incredible risk by these many financial institutions continues to spell certain failure, even as the unknown risks of the present and future loomed.
 

Armstrong Williams is on Sirius/XM Power 169, 7-8 p.m. and 4-5 a.m., Monday through Friday. Become a fan on Facebook at www.facebook.com/arightside, and follow him on Twitter at www.twitter.com/arightside.