What's driving the stock market higher?

[gregintenn]

Inflation concerns are the only thing I can come up with. What do you think? Are we recovering?

[Guest Lester Weevils]

The gov keeps several inflation stats. I can't recall the name of them all. The one used for most gov purposes may be called consumer price index and includes energy and food. CPI maybe it is called. That is the one used for instance calculating cost of living increases in social security.

Then there is the one perhaps called Core CPI, which ignores food and energy. Since food and energy are the main things going up, the gov likes to use the Core figure at the moment to make it look better.

However the CPI stats may not show true inflation. House prices still show deflation if you just look at the cost of housing. If you just look at precious metals or oil or some other commodities, it shows outrageous inflation much worse than the CPI.

I have been suspecting that the value of a dollar is actually a lot lower than what it appears to be right now if you buy a flat screen TV from Walmart. Have been suspecting that the value of a dollar against gold or silver MAY be a truer judge of inflation than the value of a dollar against an IPad or a packet of Chinese socks.

It is difficult to know. Maybe precious metals are far over-valued WORLDWIDE right now, in a WORLDWIDE commodity bubble that eventually will burst.

I don't pay attention to stock prices, but for instance if the S&P happens to be 10,000 today, and it happened to also be 10,000 sometime in the year 2000-- Then even using the gov CPI stats, that doesn't mean that the stock market is flat from 2000. It would mean that inflation-adjusted, the stock market would be at least 20 percent down compared to 10 years ago.

You could use this Bureau of Labor Statistics Inflation Calculator to compare the value of the current market compared to historical values--

Inflation Calculator: Bureau of Labor Statistics

That calculator uses the gov's own numbers.

If the gov is wrong, and is either under-estimating or over-estimating true inflation, then different conclusions could be made. I don't think the pro civil servants compiling the inflation stats intentionally deceive. I bet they try their best to get accurate figures. Maybe their results are as good as it can get.

Any government either liberal or conservative would try to spin those numbers in the best light possible, however.

Dunno much about it, but my hunch is that the market has actually been trending down for quite awhile once you take into consideration the true inflation. Whatever that may be.

[1gewehr]

Since, 1980, the government has taken items off the list they use to calculate inflation. Basically, if the price went up, they took it off the list. Here are the stats if they were accurately compiled like they did in 1980:

Alternate Inflation Charts

As you can see, the Federal government under-reports inflation by 7-10% each year. We are currently over 10% inflation. At 10% inflation, the dollar loses half of it's purchasing power every 7 years.

[Guest HvyMtl]

Devaluation of the dollar. Check the rise of the stock market in value with the decrease in the dollar. I expect the rates are similar.

[Guest 6.8 AR]

The government printing presses and the Fed and all of the above.

[bajabuc]

The only thing holding the line against inflation is wages...everything else is going up

[JayC]

Inflation concerns are the only thing I can come up with. What do you think? Are we recovering?

I suspect the federal reserve is to blame... Loaning money to Bank A at 0%, and then allowing Bank A to turn around and buy T-Bills from the government is allowing a lot of businesses to show steep profits right now, and is one of the reasons I think we're seeing increases to the Stock Market.