If you look closely the stock market is riding a very high price/earnings multiple in the area of 20. That's OK since the stock market is generally viewed as a forecast for the future rather than a barometer of the present, theoretically.

 

But, take a closer look, we are indeed seeing companies meeting or beating their forecasts and analysts expectations, which is good because it means things are getting better faster than expected, theoretically.

 

Start to look even closer and you see companies making more money with lower sales volumes, which is good, theoretically, because that means they are more efficient and productive. Then take a look at where these companies have actually cut costs so we can smile at how clever and bright they are, theorectically.

 

And here is the rub, dear reader, all our expectations of a turnaround are ultimately based on lower operating costs from lower labor costs and leaner inventories. But, less employment means less money to buy less goods and that means you can operate with lower inventories for now. But you can't cut your labor costs (ie more unemployment) and cut inventory costs (because less being purchased) more and more to keep showing a profit, soon enough the emperor will be seen wearing no clothes. The recovery is a mirage.