RACHEL MARTIN, HOST:
This is WEEKEND EDITION from NPR News. I'm Rachel Martin. Every time you turn around in this election season, one campaign or the other is talking about the economy, and jobs in particular. The unemployment rate gets a lot of attention as a major indicator of the country's financial well-being, and it's recently dipped below 8 percent. But the stock market is another bellwether for our collective economic health. And that's what we're going to focus on now. To help guide us, we have reached out to Roben Farzad. He's a contributing editor to Bloomberg Business Week and he joins us from Richmond, Virginia. Welcome to the program, Roben.
ROBEN FARZAD: My pleasure. Thank you for having me.
MARTIN: So, obviously, Roben, Wall Street's health and wellbeing is one kind of indicator about the larger economy. What is the stock market doing these days and what does it tell us about the health of our economy?
FARZAD: Don't look now but the stock market is actually up. If you look at the S&P 500, it's up 14 percent this year. You could say it tells you something about a big part of our economy in the way that corporations are so flush with cash. Earnings are set to hit a record this year. The banks have been recapitalized. Companies can borrow for next to nothing. Life is good, especially when you have Ben Bernanke at the Federal Reserve prying open every monetary fire hydrant to flood the plain. And people's appetites for risk assets go up because, obviously, you get so little in government bonds or bank accounts.
MARTIN: So, people are willing to take bigger risks.
FARZAD: They're forced to take bigger risks. Effectively, they're smoked out of safety. And you get the impression - and the numbers certainly back this up - that the investors who are in the stock market today, the individual investors are kind of holding their nose and doing it because they were stung so many times. They were hit after the dot-com crash and clearly the crash of 2008. And it's been such a reluctance to come back.
MARTIN: So, this election year has been marked by obvious concerns about the economy. Democrats and Republicans both kind of painting these alternate economic realities to support their own positions. What impact do you think does election politicking have on the markets?
FARZAD: I'm surprised that it doesn't have more of an impact because, after all, we're looking at an impending dive down a fiscal cliff. Tax rates on dividends, on capital gains are set to automatically shoot up in 2013 unless Capitol Hill and the White House, whoever's in the White House - if there's a lame duck situation, if it's Mr. Romney come to some sort of agreement. Amazingly, in spite of that, the market has been running up, even though you have brokers and Wall Street strategists out there saying this is a serious situation. You might have some cases where certain tax rates for investments jump from 15 to 43 percent. Do people realize the risk that's out there? I think that by and large investors are more focused on the low-rate environment, the fact that corporations are still banking record profits and they'd rather deal with that when and if they have to deal with it.
MARTIN: So, how are you seeing the winds blow, Roben? Are you optimistic about long-term recovery for the economy?
FARZAD: I am worried that this is much more of a chronic situation than anyone had anticipated. Look, this has been going on now, this financial crisis and the after effects, for the better part of five years. Those Bear Stearns hedge funds blew up in the summer of 2007 and we got the first rumblings that someone was really wrong on Wall Street in autumn 2007. And then it all blew up in 2008. And, yes, we lost a majority of the jobs in 2008 and 2009, but we're not creating anything near the hundreds of thousands of jobs a month that we need sustainably to truly put a cut in this unemployment rate. You put that world aside - and it's really painfully difficult to put aside - the stock market is doing its thing. Corporations are feeling flush. They are selling their wares. They are refinancing their debt at far lower favorable rates. And this is kind of a story of two worlds right now.
MARTIN: Roben Farzad is a contributing editor to Bloomberg Business Week. He spoke with us from Richmond, Virginia. Thanks so much for talking with us.
FARZAD: Thank you.
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