Increasingly, analysts are warning that earnings potential is not keeping up with the stock rally that has pushed the Dow Jones industrial average up more than 11 percent this year with the Standard & Poor's 500 jumping even higher, up more than 16 percent.
The third quarter's earnings projections could provide a cold comeuppance, but the rally also points out that trickle down is a fairly irrelevant construct when considering economic health. Wealth does not trickle down, nor does it flow anywhere just because it's romantically inclined to do so.
Corporations have been sitting on piles of cash throughout the recovery, because the recession stopped capital investments and put upgrades on hold. The recession also knocked millions of people off company payrolls -- and it turns out that laying off workers to cut operational costs is extremely effective.
Recessions are well-known reality checks. Companies lay off workers and then realize they can operate pretty well with a skeletal staff. Meanwhile, the incentive to rehire isn't there, because consumers are suddenly out of work and the company is capable of turning out widgets with a smaller staff.
There is no such thing as a free lunch. What trickles down is opportunity or maybe it should be called benign exploitation. Companies hire when they are overrun with customers, not when they are drowning in cash.
For what it's worth, the U.S. Federal Reserve's quantitative easing strategy can be very useful to companies, but it's an extremely inefficient way to expand the nation's payrolls.
When President Barack Obama signed a $787 billion stimulus bill in 2009, every economist, pundit and politician began counting jobs, as if they were leaning on the rail with a stopwatch while watching Seabiscuit take a turn around the track.
That doesn't happen when the central bank spends money. The measurable gain from QE3 is that interest rates will drop or stay low longer. Does that sound like jobs? Not really.
The Fed's mission is twofold. One is to keep inflation in check and they've been admittedly lucky that price gains have been marginal since 2007, when the recession began. Core inflation -- prices excluding food and energy -- has barely moved, mostly because high unemployment has forced producers to keep prices in line.
What the Fed has done is put so much pressure on interest rates that they are flirting with disaster. If anything, they have been courting inflation, not managing it.
The Fed's second mission is to do whatever it can to promote employment. But providing wealth for companies and investors is a poor excuse for a jobs program.
The Fed's mission has nothing to do with creating a stock bubble. With Congress sitting out the recovery, however, the Fed would appear to have little choice in the matter. Like an overeager kid brother, it wants something to be done -- anything. Even a futile gesture seems better than nothing.
In international markets Monday, the Nikkei 225 index in Japan dropped 0.45 percent and the Shanghai composite index in China rose 0.32 percent. The Hang Seng index in Hong Kong slipped 0.19 percent and the Sensex in India slid 0.42 percent.
The S&P/ASX 200 in Australia fell 0.52 percent.
In midday trading in Europe, the FTSE 100 index in Britain lost 0.51 percent while the DAX 30 in Germany dropped 0.67 percent. The CAC 40 in France shed 1.08 percent and the Stoxx Europe 600 slipped 0.62 percent.