Is this the real life? Is this just fantasy? These are the opening lyrics of Queen’s epic rock ballad “Bohemian Rhapsody”. For years, rumors circulated about the meaning of this iconic song, including a popular theory that it was a metaphor for Freddie Mercury’s battle with AIDS. The legendary front man ultimately dispelled such speculation, explaining that the lyrics were nothing more than “random rhyming nonsense.”
While the song may not have been written with any particular symbolism in mind, the opening lyrics are strangely metaphoric of today’s irrational investment environment, which has many investors pinching themselves as the stock market continues its historic rise despite deeply entrenched structural problems.
A Recovery That Only Wall Street Can Feel
Though the stock market has never been a true proxy for the state of the economy, the degree to which today’s financial markets are decoupled from reality is astonishing, and it increasingly appears to be the result of some sort of collective cognitive dissonance toward bad news.
To understand just how out of touch the markets have become, one need only consider the stock market’s jubilation over the April jobs report, which sent the Dow Jones Industrial Average over 15,000 for the first time in history. Sure, the unemployment rate fell to its lowest level in four years as the economy created or filled 165,000 jobs, but what media pundits and financial “experts” aren’t discussing is how unemployment is still well above pre-recession levels, or that jobs are being created at the slowest rate of the past eleven recessions.
More important, the numbers themselves paint a disingenuous portrait of the labor market, due to the use of highly controversial methodology. For reasons only a bureaucrat can comprehend, “discouraged workers — those individuals who have given up looking for a job — are not counted as part of labor force and therefore are excluded from the unemployment rate, even though the majority of these people are not without work voluntarily.