Monday, July 27, 2009

Is the rally a psych-job?

Alan Abelson is profoundly skeptical of recovery talk:
The melancholy fact is that our ink, online and TV colleagues can be too easily snookered by Washington, Wall Street and Corporate America, all of whom are desperately peddling recovery rather than reality.
Take the big play given to the 3.6% rise in sales of existing homes last month, which helped power a nearly 200-point rally in the Dow that lifted that venerable index over 9000 for the first time since January. Adding to the excited stock market response was the refrain in virtually every story, whether recounted in print or on the Internet and the tube, that this was the third month in a row of higher sales, signaling that the long-awaited but frustratingly elusive bottom in housing had been reached. Really?
As Mark Hanson of the eponymous real-estate advisory points out, it's a seasonal phenomenon that until recent years has happened every year.
Indeed, the wonder of it is that, with prices soft and mortgage rates down, sentiment better and supply restrained by foreclosure moratoriums, sales weren't higher than a year ago. Some of those benign factors are changing, and not for the better: Rates are creeping up, moratoriums are ending and foreclosures are on the rise. . . .
Lots more analysis there. And, really, there's no shortage of bad news, including the possibility of another wave of bank failures caused by exposure on bad commercial real-estate loans. Also, there's this:
Of course, the mood could shift in a hurry. . . . The growing herd of bulls is itself a warning to some investors that the current surge is about to run its course. Plus, the longer-term outlook for economic growth and corporate profits still is uninspiring.
Plus, the longer-term outlook for economic growth and corporate profits still is uninspiring.
Which is to say: The market will either go up, or down, or stay flat. Man, I'm starting to think I missed my big chance -- become a financial writer and gain a reputation for genius with carefully hedged analysis that never actually amounts to prediction. Like being a weatherman who never gets around to saying firmly, "It's gonna rain tomorrow," you're always 100% accurate.

6 comments:

  1. There is a Marine Corps jodie (running song) you can chant a 120bpm:

    I'm not the killer I'm the killer man's son.
    I'll do the killin' 'til the killin' man comes.

    Ye bleeding hearts can bemoan the wanton violence inherent in the couplet. War is hell. Pray for peace, and inoculate yourself against the horror of war.
    The point is that the budget deficit is the killer man's son, and the national debt is the killin' man.
    This sucker rally amounts to arranging the potpourri to greet the diabolical duo.

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  2. Obama's numbers down = Market indexes up ... my theory anyway.

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  3. You COULD get some solidifying of the market around 9000, or some weak bump... but there couldn't be much more left for now.

    There might even be a corporate "recovery" of sorts, with some surprise earnings like from Ford... it's possible. It would come from the GEs and Googles of the world, as Obama has only focused on major corporations and unions... and some of these like GE have been obsequious bootlickers and enablers for this misguided administration-

    But any recovery will surely be a "jobless" one- as in the EU, even when profitablity returns, the draconian regulation and eye-watering taxes ensure jobs return very slowly... if at all. And Obama has structured us now along these lines... even more so with CapnTax and/or Obamacare enacted (both doubtful, imo).

    Even if all his tax hikes aren't here yet, businesses surely expect them... and will be acting accordingly (cautious/no investment/no hiring).

    Add to this the fact that Obama has terrified every small business and entrepreneur in the country... those who Reagan told us create "most or all" of the hiring and growth in this country... and you can expect high unemployment to be with us until well through Obama's attitude adjustment in Nov 2010.

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  4. When, exactly, do the Bush tax cuts end? The market will drop like a stone then, even without Cap'n Tax and Obamacare.

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  5. I'm surprised that nobody has brought up Laffer's money supply graph from way back in the first week of June. We've had a couple of decade's worth of money supply dumped into the commercial markets in the last year. Where is all that money going to go? It's buffing bank balance sheets, but with commodity demand still pretty low and there being relative reluctance to dump a ton of money into T-bills whose yields are all but fated to be dwarfed by inflation in a couple of years, it seems like the thing to buy is stock. There are plenty of stocks whose dividend is paying more than a T-bill.

    I know, it seems stupid. But it wasn't that long ago that people were buying contracts for $140 a barrel oil for delivery this month, and giving home loans to people without a credit history and based on "reported income". Stupider things have been done. The difference this time is that it seems to be the Treasury and the Fed doing the stupid right at the money tap, instead of investment houses doing it. What happens when the "lender of last resort" can't find anyone to buy its paper?

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