Reality Gap Between Wall Street and Main Street Widens

By:  Bob Adelmann
Reality Gap Between Wall Street and Main Street Widens

The battle between a stock market that moves inexorably higher and an economy that continues to languish will be won when reality is recognized: The economy is getting weaker and consequently stocks are overpriced.

On Thursday, the last trading day of the first quarter of 2013, the Standard and Poor’s index of 500 stocks — the S&P 500 — traded at 1567, two points above where it traded in October, 2007, just before it plummeted to 676 in March, 2009. With that news, the sigh of relief on Wall Street was nearly audible. CNNMoney gushed:

Finally! The S&P 500 topped its all-time closing high in morning trading Thursday, after flirting with the milestone for weeks….

The Dow [Jones Industrial Average], which has been trading at record highs since early March, is up more than 11% and poised to book its best first quarter since 1998. The S&P 500 is up almost 10%. The Nasdaq is up 8%.  

And there’s more to come, according to the staff at CNNMoney: “Valuations remain attractive for U.S. stocks … and looking at earnings projections, stocks still appear reasonably valued.”

This no doubt is a surprise to the writer at Activist Post who exactly three months ago said that this is “a false bull market. That is why we feel comfortable predicting a significant decline in the stock market in 2013 … Look for the Dow Jones to dip below the 10,000 mark [it traded Thursday at 14,564] next year.” That would be a decline of more than 30 percent.

Anthony Mirhaydari, writing for MSN Money, said “there are still serious problems with the real economy” and proceeded to outline them:

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