While eating your Cheerios this morning, you did a double take on the headline for the lead article in the New York Times: Recession Officially Over, U.S. Incomes Kept Falling. ‘Splain that one to me, you said. Easy. “Official” designations of the state of the economy are the confections of economists employed by the government, thereby 100% discountable before the ink is dry on the report. On the other hand, the report on incomes is straight up, no jiggering with what is or what is not to be included in this quarter’s numbers, and the numbers are incontrovertible evidence that the deflationary depression that began in 2000 is still underway. Someone please inform the editors of the Times.
Also this morning, this Q/A between an investor and an advisor in the financial section of USA Today: Investor: “After 10 years in the market, I am still in the red, and stocks continue to fall. I would have been better off with a savings account (no kidding, ed.). Should I give up on the stock market?” Advisor: “Blah, blah, blah…, bad idea to get out now (sic).” Why does neither comment surprise us? It will be the hapless leading the hopeless for a while longer.
New bull markets usually seem like they’ll never get underway. The market inches up a little at a time, only to slam down for any little reason. Investors are so skeptical, they have a hard time staying invested. Bear markets are the reverse. Long after the top, investors desperately want to believe. Phony news like we had today is all it takes to bring on frantic short covering and a complete halt to any liquidation that might be going on. An oversold market with a completed Elliott wave of minor degree last week was the setup for the rally underway now.
On the other hand, new buying will not be forthcoming any time soon. Institutional cash levels, at just over 3% of assets, are the lowest on record. The counter trend rally should end in due course and, eventually, after much greater loss, investors will conclude they should have stood in bed-or in cash, and liquidate. By then the losses will be horrendous.
Moneyball, a wonderful movie currently in theatres, began life as a great book. It is a true story, told in a delightful way by Michael Lewis, one of our best working journalist/authors. Lewis’ latest book, Boomerang: Travels in the New Third World is just as much fun. The book covers the stranger-than-fiction financial foibles of Iceland, Greece, and Ireland, three little countries that, with the help of Wall Street’s finest, caused themselves and much of the Western world unbelievable financial grief. Get this book. It’s a quick, easy, very insightful read. You will laugh ’til your sides hurt. Later, you’ll realize that the pain in your ribs was just a precursor to much greater discomfort we in this country will experience down the road.
The author makes no representation as to the accuracy of the quoted material, but believes the sources to be reliable. No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.