Great Disconnect (Grand Disconnect)

The “Great Disconnect” (or “Grand Disconnect”) occurs when the stock market doesn’t reflect economic reality. Gary Shilling, an American financial analyst, wrote in Forbes magazine on September 20, 2004:
 
“Financial markets and the U.S. economy parted company in the late 1990s as Wall Street lost touch with economic reality. That great disconnect still exists.”
 
The Dow Jones Industrial Average reached an all-time high in early 2013, and Shilling told the Globe and Mail (Toronto) in January 2013:
 
“Right now we’re in what I call The Grand Disconnect. (...) And I call that the grand disconnect between the real economy and investors’ view of the world.”
 
The “Great Disconnect” term has been used by many other financial analysts, such as Alan Abelson and Robert Reich in November 2009, Henry Blodget in March 2010 and Charles Hugh Smith in August 2010. The “Great Disconnect” began to be frequently used in early 2013, as the stock market’s meteoric rise—largely influenced by money-printing—was not reflected in an American economy that was still struggling to come out of a recession.
 
   
Wikipedia: Gary Shilling
A. Gary Shilling is an American financial analyst and commentator who appears on a regular basis in publications such as Forbes Magazine, The New York Times and The Wall Street Journal. He is President of A. Gary Shilling & Co., Inc., editor of A. Gary Shilling’s Insight, and member of The Nihon Keizai Shimbun Board of Economists. He is featured frequently on business shows on radio and television, and as a recognised orator, addresses conventions of global business groups like the Young Presidents’ Organization.
 
Forbes.com
Wall Street in Dreamland
Gary Shilling, 09.20.04, 12:00 AM ET
The financial world remains, alas, dangerously divorced from economic reality. The speculative fever of the 1990s persists to this day. Watch out.
 
Financial markets and the U.S. economy parted company in the late 1990s as Wall Street lost touch with economic reality. That great disconnect still exists.
   
The Market Oracle
Gold, Inflation and the Casino Capitalism House of Cards
Apr 11, 2009 - 11:41 AM GMT
By: The_Gold_Report
(...)
The well known commentator Gary Shilling has described the phenomena as the Great Disconnect between the real world of goods and services and the speculative world of financial assets. The result was the financial house of cards that collapsed when the housing boom turned to bust.
 
Gonzalo Raffo InfoNews
MONDAY, NOVEMBER 16, 2009
UP AND DOWN WALL STREET (Barron’s)
Mind the Gap
By ALAN ABELSON
The great disconnect between Wall Street and Main Street is sure to end in tears. Update on commercial real estate.
 
IF WE HAD ONLY KNOWN. ALL THIS TIME, we’ve been moaning about the great disconnect between the scintillating action in the stock market and the dour mood out there in the real world. While Wall Street remains gleefully focused on how much higher the stock market, already up 60% since the March low, will climb, Main Street continues to be plagued by existential fear that jobs, incomes, homes, all the things that go with the good life, are in jeopardy. We’ve spent countless hours fruitlessly attempting to unravel this mysterious discrepancy, but not until last week did we quite fortuitously stumble on a possible solution.
   
RobertReich.org
The Great Disconnect Between Stocks and Jobs
WEDNESDAY, NOVEMBER 18, 2009
How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.
 
Business Insider
THE GREAT DISCONNECT: Stocks 30% Overvalued And Still Going Up… And Housing Rolling Over
Henry Blodget | Mar. 25, 2010, 6:34 AM
We don’t mean to rain on the stockmarket parade (we’re enjoying it, too), but we’ll confess to being astonished by it.
 
The Market Oracle
Solving the Great Disconnect Between Stock Market and Economic Reality
Jul 31, 2010 - 03:26 PM GMT
By: Mike_Larson
We have a “Great Disconnect” on our hands.
 
On Monday, the Federal Reserve Bank of Dallas released its latest manufacturing survey. This wasn’t old, stale data; the survey was conducted in mid-July. And the results were awful, with the headline index plunging to -21 from -4 a month earlier. That was the worst showing in a year.
 
Yet the Dow Jones Industrial Average jumped 101 points.
 
Of Two Minds by Charles Hugh Smith
TUESDAY, AUGUST 17, 2010
The Great Disconnect (The Bullish Case for Stocks Part 2)
The U.S. stock market is largely disconnected from the U.S. economy, as are the 5% who own most of the stocks and other assets.
 
Business Insider
GARY SHILLING: Here Are 10 Ways To Invest In The ‘Grand Disconnect’
Mamta Badkar | Jan. 11, 2013, 8:47 PM
The global investment environment continues to be dominated by deleveraging, according to famous economist Gary Shilling.
 
The Market Oracle
Gary Shilling Expects Great Disconnect to Cause Stock Market Crash 2013
Jan 28, 2013 - 06:20 PM GMT
By: DailyWealth
(...)
Last week, Shilling spoke with Canada’s Globe and Mail newspaper.
 
He explained his big idea today – he explained the “Grand Disconnect”... 
 
Right now we’re in what I call The Grand Disconnect… The economies of the world are growing slowly… But investors couldn’t care less. All they are concerned about is the money being shoveled out the door by central banks. 
 
And I call that the grand disconnect between the real economy and investors’ view of the world.
 
Shilling thinks the world economy isn’t really doing that well… and that you can’t get sustainable prosperity and sustainably higher stock prices by printing money. He thinks the Grand Disconnect has to end badly…
 
I think sooner or later it will be eliminated by some big shock… I think it could [be this year] but forecasting big shocks like this is obviously difficult. It’s in the cards, it’s just a question of when it will happen.
   
Minyanville
Connecting 1937, 1962, 1987, and 2013
By Jeffrey Coope
February 7, 2013 09:37 AM
(...)
The economy remained in The Great Depression although there seemed to be a Great Disconnect between what the market was saying and how the economy was doing.
 
I suspect that for the vast majority of analysts and economists, the hope was that the economy would follow the market, that the market was pointing to and discounting a genuine recovery.
 
It was not.
     
The Wall Street Journal
February 14, 2013, 2:32 PM
The Great Disconnect: Stocks Rising While Economies Lie in Stasis
By Paul Vigna
Forget about the Great Rotation. Focus on the Great Disconnect.
 
The sell-side boys have been salivating at the thought of finally getting their hands on the fund flows from bond investors who’ve been scarred by the Great Recession.
 
But the Great Rotation, as it’s being called, may be little more than another chance for the sheep to get fleeced. The other big theme in the market – which, of course, isn’t getting much attention these days – is the Great Disconnect: the fact that economic growth has almost completely stalled in the world’s biggest economies, while equities markets march to new record highs.
   
MarketWatch
Dow’s back on top — but are you?
Putting all the market-milestone hoopla in perspective
March 05, 2013|Charles Passy
(...)
Still, many financial experts say that there’s a rationale behind those headlines, despite the market’s rosy return and other improving economic indicators. In short, they view the current state of affairs as the Great Disconnect that has followed in the wake of the Great Recession. And it’s a story that they say can be told in one sobering statistic after another.