FedUpUSA

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Submitted by Greg Simmons and Brett Buchanan of Scope Labs

Are financial markets a direct reflection of the overall health of a nation? I wish they were not, but I fear they are.

I wonder at times if our nation has entered a state of purgatory –
all of us mulling around in the waiting room to Hell, anxiously
counting the minutes until the grim reaper saunters through the door
sickle in hand his mission to send us off to eternal damnation.
Unfortunately, there is little time to close this door so that we may
stave off this potential fate that looms so near. What we need to alter
this course is a procession of men who possess moral fortitude and
common sense, men of rationality and reason. Men of action who will set
in motion the dismantling of institutions that bleed this nation dry.

Hope is not a strategy. This present state of manufactured optimism
emanating from the White House and our news outlets is contemptible. We
are in dire need of new reformist leadership and of new voices that
will speak the truth. A national purification is long overdue. Time is
not on our side. Look at the track record this nation has racked up
over the last few decades and this economic and moral purgatory in
which we find ourselves might very well mark the beginning of our walk
of death down the long road to Hell.

I make this analogy of a national state of purgatory not in jest,
but rather in practical terms. This nation has gone the way of an
absolute meltdown of morality and ethics. We’ve reverted to a sort of
Wild West where anything goes. From the halls of congress to our
corporate boardrooms our collective morality bar has sunk so low we
cannot go any lower without disconnecting from the great past this
nation is starved to regain. We stand dangerously close to the point
where immorality begets our undoing.

Personally, I am father to a daughter of fourteen years. Brett, my
co-author, is father to a twenty-month old daughter and an
eighteen-year old son. We desperately want to create for our children a
better world. But we are fallible men, and certainly not saints. The
paragraphs you are about to read are not written from some moral high
ground, or a Holier-than-thou pulpit, but rather from saddened hearts
when we see that by walking our own moral tightrope, if we were to
allow ourselves to slip below the bar, however slightly, we would be
just as guilty as the worst perpetrators of our nation’s moral
destruction. Also, when witness to greater moral transgressions, by our
own inaction, we become part of the problem. And we are just two men.
Amplify this by fifty million, one hundred million, or three hundred
million fold and it is no wonder immorality permeates our society.

This article is our personal effort to call people’s attention to
the truth. The brevity of our circumstance is immeasurable by past
reference. Economically, we have never been so challenged. Over the
past few decades a gullible US population cheered the halls of congress
and the Oval Office alike as the incestuous bedfellows of money and
politics ushered in a financial Coup d’état – co-opting our public
trusts with the greed and excess of Wall Street. Profits are now had at
any cost – damn the long-term consequences. Instead of being exposed as
the obvious fraud he was, Bernie Maddoff was coddled by the SEC – an
institution whose role as regulator is a complete failure. As Wall
Street and Washington raped an entire nation, employees of the SEC were
too busy surfing porn on the Internet and running private businesses
instead of doing the jobs taxpayers pay them to do. All the while,
young girls were selling their virginity to the highest bidder in
public cyber-forums where grown men (not hormonally charged teenage
boys) seek out their sexual fantasies in the netherworld of Internet
pornography. What of the wives, children, and even parents of these
men? Do they approve of such questionable actions?

Think of our children turning on the television to see people eating
bile, cow blood, and live bugs for money on game shows like Fear
Factor, or Flavor Flav and his hit reality show where he maintains a
stable of women all of whom physically fight each other to have sex
with him because he’s a celebrity – and a damn ugly one at that. And
finally, there’s always Survivor, the ultimate demonstration of all
things wrong with modern human interaction. A reality show that pits
person against person in a deceitful game of moral destruction where
lack of ethics are rewarded, instead of punished. Survivor, this is
what our nation’s leadership has become. Win at any cost. Damn the
future of anyone but myself.

Morality is in great part the measure of a nation. Have we unlearned
morality? Is this why we find ourselves staring down the abyss?

We are allowing ourselves to become more corrupt by the minute. We
stare into the face of our future being raped, but we do nothing. We
are as corrupt as the corrupters. We accept the unacceptable. We fail
to understand that absolute power, corrupts absolutely. In what will go
down as the greatest financial heist in history our leaders have chosen
to reward corrupt individuals and their hollow corporations for what
are arguably criminal levels of risk behavior by the moneyed elite of
this country. What message does that send to our children, or to anyone
for that matter? Be as corrupt as possible in the US and you will be
rewarded? Be the biggest failure jeopardizing the fate of others then
stand in the corporate welfare line with all the other wealthiest
institutions of the world, your greedy hand extended for a government
bailout check while you simultaneously foreclose on an entire nation?
Talk about the rich corralling the masses. It’s no wonder someone
coined the term “The Sheeple.”

The path we traveled to this purgatorial limbo is both easily
understood and misunderstood. The answers to understanding are
sometimes right in front of us. What are seemingly benign things or
actions, those everyday judgments or decisions we make to do one thing
or another, are not always benign. Tell a little white lie to make that
one sale that will put us into our bonus. Rig the game in our favor so
that we might enjoy a little more opulence for the few decades we have
remaining on this planet. Look the other way while the Federal Reserve
and Wall Street blow economic bubble after economic bubble and in the
process create a six-hundred trillion dollar shadow banking system that
plays by no one’s rules but its own. In the case of Goldman Sachs, and
Wall Street in general, lie, cheat, and steal their way to
profitability at the expense of three hundred million taxpayers. The
fact is that we have become an uncooperative nation willing to take
advantage of anyone for the sake of profit. The idea of building a
cooperative future where everyone wins has been sacrificed at the altar
of short-mindedness.

It might be this purgatorial limbo I speak of is simpler than it
appears. It could be that we are collectively suffering the
consequences of the “Peter Principle”, or getting to the job of
failure. This principle supposes that an individual rises in a
corporate hierarchy to their first level of incompetence. An assembly
worker gets promoted to supervisor then to assistant manager, then
manager, until he next gets promoted to an upper management job for
which he is ill equipped and subsequently gets promoted no further as
he can no longer demonstrate the competence required for the task at
hand. He rather relies on subordinates who are then stuck with an upper
manager who cannot carry out his own duties. Could this be the state of
our nation? Have we been promoted as far as our competence allows? Are
we in fact incompetent to handle our future? Have we now elected a man
just incompetent enough for the Presidency who is being manipulated by
Goldman Sachs, the Federal Reserve, and a circle of (previous) Wall
Street insiders now on the government payroll as cabinet members and
high-ranking advisors? The saddest thing is that we sit idly by whilst
our virtue is being stolen. We do nothing.

A view of the world through rose-colored glasses does no one, any
good. We are not as resilient as we think we are. Instead, we exist in
a world of synthetic productivity where multi-tasking renders us
incapable of doing anything effectively or with any level of
competence. Multi-tasking, that art of simultaneous ineffectiveness is
a counter productive weapon that to a large degree has contributed to
the potential failure of this nation. If you were to listen to Alan
Greenspan however, you would believe that multi-tasking through
technological gains by way of the “new paradigm” was the gold at the
end of the Information Superhighway and that exotic mortgages and the
burgeoning spending class paved the road to riches. We now know these
premises to be empirically wrong.

It can now be argued that what would seemingly be advancements in
productivity are proving to be setbacks. The Information Superhighway
has led us to an era of technological arrogance. In reality all we have
accomplished is to dilute our ability to carry out simple tasks as we
click from a quarterly sales report due in an hour, to Facebook, to
on-line solitaire, to writing an email explaining to our boss why the
quarterly report will be delayed this day. We are a nation of excuse
makers. We look for someone else to keep us one step ahead of our
accumulating debt that smothers the potential of what could have been
an equitable future. Ironically, it is our technological arrogance that
impedes our ability to produce and manufacture our way to prosperity.

Craftsmen who used to flock to this country to fulfill the needs of
a manufacturing base flock here no more. “Made in the USA” used to mean
something. It meant quality. It was the definition of industrial
capitalism. But now through the wonders of globalization we have
exported our craftsmanship through an outflow of jobs to China and
India as we turned everyone in the USA into real estate agents,
mortgage brokers, and web designers – a perfect playground for bankers
to ply their craft, lending money in every creative manner both
thinkable, and unthinkable. “Made in the USA” has been reduced to the
status of punch-line – synonymous only with “Mortgage Backed
Securities” and other “Toxic Derivatives.”

Is it any wonder we have evolved into the ‘entitled society’? If we
weren’t on the government payroll, or subsidized by the US taxpayer
through social welfare then we were borrowing our way to prosperity.
Enter the God-fearing middle class. Just dumb enough to buy into the
scam a couple hundred million people began signing over their
paychecks, selling their future for the enjoyment of having things now.
We were transformed into non-productive Sheeple, selling our souls for
an easier life in lieu of a better future for our children. At our
current rate of productive attrition we will soon be a nation of
declawed housecats, possessing no skill-set whatsoever to survive in a
world where the ability to produce real goods still reins supreme. Yet
we remain the ‘entitled society’, when we are entitled to nothing.

We forget (through economic amnesia) that throughout history all
societies fail. Nicolaus Copernicus maintained that civilizations
failed when bad money, controlled and understood by an elite few, drove
out good money. The same can be said for morality. Bad, drives out
good. This is a reality of which we should all be acutely aware but
rather are immune to its possibility. We dangerously believe we cannot
fail. That, in fact, is the greatest gamble of all. A roll of the dice
against history, a bet against all natural laws of the universe, all
things are in a state of entropy. All things eventually wither away to
nothing. To possess longevity is to be ahead of the universe. Sadly, we
have constructed a fragile world that produces material things that do
not last. The fiat money we use as the currency of our production is by
design, destructive itself. The Federal Reserve prints greed, nothing
more. But still we covet it. We pursue it as if it had value. And in
this pursuit we destroy earth’s resources as if the laws of nature have
no relevance. We believe there is only now.

We, the entitled society, morally and fiscally bankrupt have borrowed,
spent, and bailed our way into a historical corner. Nero should be so
proud. Our public trusts are nothing more than government sanctioned
check-kiting operations shifting liabilities from one credit card to
another faster than our creditors can say “Federal Reserve.” The
Ponzi-scheme that is our fiat currency system is about to go the way of
what was for a time the symbol of American superiority, General Motors.
It used to be said that what was good for General Motors was good for
our nation. As I claimed in 2005 that GM would go bankrupt I will now
guarantee that the US government is soon to follow. How our ultimate
entropy will take form I cannot say, but form it will. We will default.
We will restructure. It will be at this point our arrogance will end.

The House has passed a bill to audit the Federal Reserve. 79% of the American people support a full audit.

In response, the Fed says that an audit would interfere with its “independence”.

However, the Constitution does not empower a central bank. And Congress — which created the Federal Reserve in 1913 and which has the power to create credit and money — certainly has the power to audit, dissolve, or do whatever it likes with the central bank (including stripping it of the power to create credit).

I have previously demonstrated that the Fed has done a terrible job of managing the economy, keeping unemployment low, and regulating banks.

And I have previously pointed out that the the independence argument is a red herring.

Indeed, the whole idea of independence means that the Fed should be shielded from political pressure to artificially pump up the economy with easy money right before elections. Congress never intended Fed “independence” to mean independence from Congressional oversight to ensure that the Fed is acting within its mandate and in the best interests of the country. These are two totally different concepts, and the Fed and its boosters are being disingenuous when they argue that an audit will interfere with independence from pressure to pump up the economy right before elections.

Now, in an interview this weekend with Der Spiegel, Paul Volcker — while trying to support the Fed’s argument for independence — actually undermines it:

SPIEGEL: Lawmakers on Capitol Hill are thinking about tougher controls over the Federal Reserve.

Volcker: I think the loss of independence and authority of the Federal Reserve would be a very serious matter for the United States. Not just in terms of monetary policy but in terms of our place in the world. People look to strong, credible institutions and I think the Federal Reserve has been such an institution. If that’s lost or too hamstrung by legislation I think we will regret it.

SPIEGEL: But is the Fed still the same kind of institution as during your tenure as chairman? Or is it now more of a governmental instrument? The Fed is managing the TARP program and is also buying government bonds.

Volcker: In some sense the Federal Reserve is always an instrument of the government. It is a government body but it is independent within government. But you are right in the sense that part of the concern is that they have involved themselves quantitatively in entering markets and in that process, you are supporting some markets and not others. That is an area in which the Federal Reserve has never wanted to get into and one that most central banks don’t want to get into. If you are going to maintain your independence you have to avoid that. To intervene in particular sectors of the market is not the proper role for the central bank over time. It could be justified only by extreme emergency.

Intervening and supporting some market players (Goldman, AIG, etc.) and not others (Lehman, etc.) is precisely what Bernanke has been doing. Whatever can be said for the Fed in the past, picking winners and losers is “not the proper role for the central bank”, in Volcker’s words. Without an audit, we will never know which “winners” were saved and which “losers” were left to die, or why. Nor do we really currently know which bailouts and other actions were truly performed under emergency conditions — to stave off catastrophe — and which were done to help out financial companies for other reasons.

Moreover, Bernanke gave many billions to private foreign banks and foreign central banks (and see this). Has the Fed been picking winners and losers among countries? Among private banks?

As former Federal Reserve economist William Bergman wrote (he sent me this by email; it was previously published in article form, but is not available on the Web):

One of the principal laws governing audits in the Federal Reserve was passed in 1978, the Federal Banking Agency Audit Act. This law established audit authority in the Comptroller General of the United States, who leads today’s General Accountability Office (GAO). The GAO conducts audits and surveys for a wide range of Federal Reserve activities, with over 100 conducted since 1978. Audit authority also resides in the Federal Reserve Board’s Office of Inspector General, who can audit Board programs as well as Reserve Bank operations when carrying out functions delegated by the Board.

The Federal Reserve’s financial statements are audited every year. The Board of Governor’s financial statements are audited by an independent auditor selected by the Board’s Office of Inspector General. The Reserve Banks’ statements are also subjected to outside audits, conducted by firms retained by the Board of Governors. These latter audits must have been an interesting exercise this year, given the massive expansion in Reserve Bank balance sheets in 2008. In turn, more generally, the Board of Governors conducts a wide range of reviews of Reserve Bank operations as part of its mandated oversight authority.

In this brief review of the Fed audit landscape, it’s worth noting that things haven’t always been this way. From the early 1930s to the early 1950s, for example, one of the shoes was on the other foot, as audit teams from the Reserve Banks examined the Board of Governors books. The GAO was actually precluded by law, law passed by Congress, from audit responsibility for the Fed, at least until the 1978 act referred to above. The main lesson here is that the structure of reporting and audit authority has changed in the past, and it can change again in the future.

But today, authority for auditing the Fed is in place. So why do so many people think we need an Audit the Fed Act?

Well, for one thing, the appearance of extensive auditing authority doesn’t mean audits are effective. Good auditing requires the willingness and ability of auditors to do their jobs. Some people view the Inspectors General, generally, and the Federal Reserve Board’s Office of Inspector General, specifically, as less than effective or independent in pursuing their mandates. In turn, some people question whether the Board’s oversight of the Reserve Banks, including the Federal Reserve Bank of New York, might be less than arms-length. More fundamentally, from the point of view of the supporters of the recently introduced legislation, there are a variety of restrictions on the ability of the GAO to audit the Fed. There are significant exceptions for monetary policy and transactions with foreign central banks and international organizations like the Bank for International Settlements and the IMF. The law proscribes GAO inspections of ‘deliberations, decisions, or actions on monetary policy,’ for example, as well as ‘transactions made under the direction of the Federal Open Market Committee.’ The proposed legislation under H.R. 1207 and S. 604 would remove those exceptions.

Why are the exceptions there in the first place? Well, a widespread mantra has it that Federal Reserve independence is crucial in allowing it to effectively pursue the statutory goals of maximum employment and stable prices. If we let politicians start mucking around in that arena too much, Fed leaders and supporters stress, we aren’t going to see very effective monetary policy. At a ‘town hall’ meeting last weekend, while addressing the audit issue, Fed Chairman Bernanke said ‘I don’t think people want Congress making monetary policy.’ But these audit bills don’t call for the Congress to make monetary policy. They call for broader authority for an independent audit of the Fed, from the General Accountability Office. Supporters feel it this authority would allow the Congress to do a better job of overseeing the performance of an entity to which the Congress has delegated the authority to ‘coin money, and regulate the value thereof,’ under Article I of the U.S. Constitution.

How independent is the Fed, right now, to begin with? The Fed is not an apolitical beast. It has had politicians working there in formal leadership positions as well as staffing roles. The Fed’s regulatory performance matters for the conduct of monetary policy, and the Fed’s relationships with the banks it regulates and bails out deserve scrutiny. Recently, we’ve been through a financial calamity, and have endured the biggest spike in the unemployment rate since World War II. Investment returns crumbled in 2007 and 2008, and Federal Reserve monetary and other regulatory policy played a significant role in this calamity. Looking back a little further, how effective has the ‘independent’ Fed been as source of stable prices? Congress passed the law first mandating ‘stable prices’ as a goal for Fed monetary policy in 1977, and the CPI has tripled since then.

The debate over curtailing the current legal restriction on GAO audits for ‘transactions made under the direction of the Federal Open Market Committee’ makes for a good case in point. This provision, on the surface, helps insulate monetary policy from Congressional oversight and/or second-guessing, promoting independent policymaking. But the FOMC conducts monetary policy under authority delegated by the Congress. It seems reasonable to allow for some form of stronger inquiry in this area, especially after the worst financial and economic crisis since the Great Depression. One facet of a possible future investigation could deal with individual monetary policy ‘transactions.’ Under the quantitative easing posture adopted by the Fed in recent years, with a wider range of financial instruments bought to liquify the banking system and promote monetary and credit growth, the question arises – at what price were those instruments bought? Were they ‘market’ prices, or were they another way to apply public resources to overpay for bad assets and help large financial firms that got into trouble?

That may or may not be a valid avenue of inquiry, but it seems like we could benefit greatly from learning about the broader range of issues that could be tackled.

Audit the Fed? Sounds good to me.

Bloomberg notes that, as of 2007:

In Missouri, about 100 percent who were eligible [for food stamps] that year took advantage of the program, the highest rate in the nation, followed by residents of Maine and Michigan, at 91 percent and 89 percent, respectively …

Things have gotten much worse since 2007:

As the New York Times notes, “one in eight Americans and one in four children” receive food stamps.

Many economists and financial experts have said that we are in a depression. See this, this and this.

I hope they are wrong, or that — if we were in a depression — we’re out of it now.

But it is indisputable that the unemployment numbers are still grim. Specifically:

• More people will be unemployed than during the Great Depression

• Some of the top economists say that America has suffered a permanent loss of jobs

• By some measures, unemployment is worse than it was during a comparable time-frame in the Great Depression

• Vice President Biden said recently: “It’s a depression for millions of Americans”

Given the above, Stacy Herbert’s question of today is compelling:

The food stamps story seems to be one that keeps popping up; I guess food stamps are the soup lines of this Great Depression?

Note: At least some economists say that food stamps give more bang for the buck in stimulating the economy than just about anything else. And see this. But economic, political and moral questions surrounding food stamps are beyond the scope of this essay.

By Edward Harrison of Credit Writedowns

I am not sure I buy Meredith Whitney’s assertion that the government is “out of bullets” in its quest to prop up the economy. It’s a matter of political will more than anything else. Nevertheless, I do agree with her basic premise in the CNBC video below that the financial sector is likely to see a more unfavourable economic climate in 2010 than it has done in 2009.

In particular, a looming crisis at the state and local government level, coupled with continued distress at regional and local banks will mean a deadly combination of higher taxes, fewer jobs and less credit for households and small businesses. Unless we see a change in the political climate in Washington, now oriented toward deficit reduction over jobs, we are likely to see a double-dip recession late in 2010 or 2011.

Whitney says “the component parts don’t add up” in addressing the Obama Administration’s conflicting rhetoric on jobs, stimulus and deficit reduction.

What’s so frustrating is you have an administration that is arguing such a populist [rhetoric] and not appreciating all the unintended consequences that the consumer and small businesses have far less credit.

I have said Barack Obama gets it because we have confirmation that he understands that raising taxes or cutting spending is what leads to a double dip recession.

I will accept that not everyone believes we should avoid recession if it means more government spending because of the enormous debt loads in the private sector and the unfunded liabilities in the public sector. Fair enough. I have my own doubts due to concerns about crony capitalism. That is an ideological debate about the role of government.

But in executing actual policy, I believe the President’s words and actions are at odds in part due to the political landscape and the wishes of the corporate interests to which he is beholden.

Witness the duelling headlines today where Joe Klein points out a speech with elbows that the President delivered today.  Michael Tomasky was equally impressed. But, this was just a speech. When it comes to actual policy, Robert Reich was less impressed.

Barack Obama is trying once again for balance. On the one hand, he wants enough government spending to offset the timid spending of consumers and businesses. Otherwise, the jobs and wage recession could drag on for years. On the other hand, he doesn’t want to set off more alarm bells about the budget deficit. Otherwise, conservative Democrats might join forces with Republicans to block heath care. So what does he do? A little bit more stimulus spending, but stimulus spending that doesn’t look like more stimulus because it’s not really adding to the deficit. It’s coming out of savings from money already authorized to be spent on the bank bailout. Hmmm?

No president in modern times walks a tightrope as exquisitely as this one. His balance is a thing of beauty. But when it comes to this economy right now — an economy fundamentally out of balance — we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.

States and cities, for example, are estimated to be $350 billion hole this year and next. They can’t run deficits so they’re wildly cutting spending, cutting jobs, cutting contracts, and raising taxes and fees. That’s a huge anti-stimulus package roughly as big as the remaining direct spending in the old federal stimulus package. Which means, Obama’s "new" stimulus, announced today, is about all we have, and it’s not nearly enough.

I am hearing a figure of $70 billion for a jobs initiative – a pathetically small number in an economy of nearly $15 trillion.  In my view, it is better to do nothing than to do something insignificant that acts to discredit your policies.

Returning to the bank world, Whitney’s recent bearishness has been on target (and one CNBC presenter mentions Goldman Sachs as an example). When asked pointedly whether she was making a general market call, Whitney says no. But she does rightly point out that distress in financials does have a spillover effect on the wider economy via restricted credit and this cannot be positive for shares.

As for TARP, Whitney makes an important point when she says the TARP repayments can be seen more as political calculation than an affirmation of banking sector health.  She believes the government needs the TARP funds to help states in severe budgetary distress because no funding will be forthcoming via legislative approval.

I see this as a textbook Larry Summers play and a continuation of the executive branch’s end-run around Congress to affect fiscal policy. In March I wrote:

The political realities of solving a financial crisis have often meant circumventing legislative approval to meet the exigencies of a particular situation. This was certainly the case in 1995 during the so-called Tequila Crisis in Mexico. And I believe it is the case again today in 2009.

Read that post to see how the Clinton Administration was able to bail out Mexico without legislative approval.  They are clearly seeking to exercise the same tactics in this case again.

The fact that this post has been all about government when I intended to write something about financial services should tell you something is seriously wrong.

The video of Whitney is below. It runs eight minutes.

As for Whitney’s comments on people without access to credit, see also Millions in US lack bank access from the Financial Times.

Submitted by Thought Offerings

With S&P 500 earnings reporting mostly (98%) complete for Q3 2009, it’s time for an update to the charts from Dividends, Earnings, and Stock Price Trends have Tracked the Great Depression.

The
following chart compares the decline in twelve month trailing earnings
and dividends since the stock market peaked in October 2007 to the same
measures following the stock market peak in September 1929:

Earnings have dropped more rapidly than during the Great Depression (dramatically so if you count reported rather than operating earnings), but they appear to have begun a recovery much sooner than occurred back then. Trailing 12-month dividends are still falling slightly faster than during the Great Depression, which is particularly remarkable given how much more severe deflation was then compared to now. These trends underscore that contrary to some claims, this is no crisis of confidence!

Since
dividend changes tend to lag earnings changes, rising earnings could
mean dividends will level out and start increasing soon (and in fact
the quarterly fall in dividends from Q2 to Q3 was small). However, if
earnings are being over-reported thanks to factors such as relaxed
accounting rules or optimistic loan loss assumptions, dividends should ultimately reveal the truth about underlying cash flows.

And
while we should all hope that this recovery can be sustained, there is
a significant probability (details of which I hope to discuss in a
separate post) that this is a temporary upturn in a longer term depression. A renewed fall in GDP, persistent unemployment, and intensifying deflationary pressures would not be good news for any fledgling recovery in earnings and dividends.

Here
is a chart comparing the dividend yield today with the Great Depression
trend. Yields are much lower today and are trending down again despite
the significant upward yield trend back then. So is this a genuine
early economic recovery, or a sign that the modern stock market tends
to be a capital-gain seeking momentum machine with little regard for
underlying fundamentals? Yes, interest rates are low, but they were
back then too, and David Rosenberg suggests most current corporate bond
yields are a lot more attractive than yields of the same companies’
stocks.

The next chart compares price/earnings ratios earnings during the Great
Depression with today using reported earnings. There is no comparison.

It is clear that the market has accepted Wall Street’s encouragement to ignore reported earnings when valuing stocks,
so here is the same price/earnings chart using operating earnings (for
the recent trend — the measure had not been invented back then):

The P/E ratio based on operating earnings has soared above 25 just as
it did at a later stage during the Great Depression. I just wish I had
more confidence that this was the start of an earlier sustainable
recovery rather than a sign of the irrationality of markets and reckless myopia.

Note:
All of these charts use Robert Shiller’s monthly stock data (with a
single representative stock price for each month), not daily prices.