YES, IT'S AN ILLUSION - AT 10:54 A.M. ET:  Many people don't realize that there was a stock-market rally between 1933 and 1937, at the height of the great Depression.  It had nothing whatever to do with the real economy.

Now, we have a repeat.  But wiser heads are warning about where all this is going:

Oct. 13 (Bloomberg) -- Allianz SE, Europe’s biggest insurer and the manager of a portfolio of about $600 billion, expects stocks to fall because economic recovery is lagging behind the seven-month jump in the Standard & Poor’s 500 Index.

“The market rally right now is -- my personal view is -- way ahead of real-life developments,” Paul Achleitner, head of finance at Munich-based Allianz, said yesterday in an interview at Bloomberg headquarters in New York. “The expectation level is so high, you’re going to have the risk that there’s going to be a discrepancy in expectation” and economic data, Achleitner said.

The S&P 500 has surged 58 percent from a 12-year low on March 9 amid signs the worst U.S. recession since the Great Depression is abating. Still, unemployment in the U.S. climbed in September to 9.8 percent, the highest level since 1983, and economists expect a rebound in consumer spending will wane as joblessness surpasses 10 percent.

COMMENT:  The Obamans will pull out all stops, and write all kinds of hot checks, to produce some kind of recovery before next year's elections, but long-term prospects are very shaky, from everything I've seen in economic reports.  People are apprehensive.  Apprehensive people don't buy, and the banks aren't being helpful.

But, you know, Obama wants next year's Nobel Prize in economics, so he might spring something spectacular.

October 13, 2009