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  • Bob Brooks

Is the Magical Recovery Real?

The magician gets up in front of a crowd to do his magic tricks. He tells the crowd to focus on his right hand because he wants them immersed in the actions of his right hand and ignoring his left hand, which is where the trickery takes place. The latest round of economic numbers is like the magic trick, and the government is the magician. The right hand is what the government wants you to believe is happening, and the left hand is the reality of what is happening. The politicians are selling a scenario where we have a V-shaped recovery. Said another way, we should go up as quickly as we went down. To support that notion, the economic numbers have magically come out strong as of late.

Two of the most critical numbers of unemployment and retail sales just don't add up.

A week ago, the unemployment numbers showed 2.5 million jobs added last month while at the same time 44 million have filed for unemployment benefits when this whole thing started in February. Even more bewildering is that about 10 of the 44 million people filed for unemployment benefits in May – you know the month where we added 2.5 million jobs? What's worst, the economists who have a consensus number of jobs they think were created or eliminated were off on their forecast by a mile. Since then, there are have been numerous articles and case studies that show the job numbers are bogus.

Then yesterday retail sales soared to a record amount for the last month of 17.7%, when economists predicted something like a rise of 8%. Either economist are losing their touch, or they are out of touch with reality. I don't think either is true. I must be in a different world because I see companies going out of business, empty malls, people still fearful of going to such places…. A record 17% increase in retail sales? Hard to buy that one. Then riddle me this - how are people spending at a record pace when they are saving (hoarding) money at a record pace? The personal savings hit a record of 33% in April. I don't think that record saving and spending numbers can exist at the same time. To be fair, these aren't May numbers. I doubt that they would change by much.

If these are real numbers, then the rise in the stock market is justified. However, if they are nothing more than a magic trick? This market is in for a rude awakening.

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