Wall Street v. Main Street
FRANK AHRENS: Right. Well, that's -- that's really the disconnect here, the Main Street-Wall Street disconnect.
We always know that unemployment, which is near 10 percent now and probably will crest somewhat higher than 10 percent -- and, also, don't think it's going to start diving right back down. It will probably stay high for a number of months -- we know that's what's called a lagging indicator, meaning the stock market comes back first.
Companies feel a little bit better about things, they start hiring people, unemployment goes down. That has been the same cycle we have seen for each of the past recessions and recoveries. What's different about this one, this is the one that has been -- had a massive infusion of federal money, taxpayer money, through the government.
And the key thing now is going to be managing the transition from sort of a government-stimulated economy to a self-sustaining economy. So, in many ways, this rally has been more of a traders rally than an investors rally. It's, traders are playing price differences.
RAY SUAREZ: So, this is often called a psychological milestone. Well, what's the psychological impact? Does it bring money into the market with a sort of reassurance that it's OK to be back there again?
FRANK AHRENS: Part of the psychological impact is, hey, if you can -- if you're one of the people who can peek at your 401(k) from time to time, it's got more money in it now than it had in it in March.
So if you thought of the Dow 14000 as being the height, in March, it was down to 6000, at 10000, we're about halfway back. So, if your stocks track the market, your retirement savings are about halfway back.
What it also does is, it helped move what Keynes called the animal spirits of the market. Markets move higher because they want to. Maybe it will bring some other investors into the market.
RAY SUAREZ: Now, at the same time as the market is -- the Dow index is hitting 10000 again, the dollar is way down. As you mentioned, unemployment is set to lag for some time.
And, just today, retail sales figures came out that showed a drop of 1.5 percent in September. So, the economy's still in pretty perilous shape, isn't it?
FRANK AHRENS: It's certainly wobbly. You need to go inside the numbers a little bit. What's interesting about the September retail sales is, if you take out autos from that, September retail sales actually bumped up a little bit. And that's exactly the government's stimulus economy I'm talking about.
September retails, no cash for clunkers. That was over. And, so, auto sales fell right back off the table. So, that's what we talk about moving from a government-fueled economy into more of a self-sustaining, organic economy.
RAY SUAREZ: And it's still a pretty long march back to investors feeling whole, isn't it, from where the market tumble began?
FRANK AHRENS: Absolutely.
I mean, if you have most of your -- say, your 401(k) in stocks, you're not going to feel whole again until the Dow hits 14000 again. And when that will be -- I was talking to one market strategist today, and I said, when are we going to see Dow 14000? And, on the other side of the phone, he just went phew.
And I said, years?
He said, years.
RAY SUAREZ: Frank Ahrens of The Washington Post, thanks for joining us.
FRANK AHRENS: Sure thing.