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Street Celebrates More Bad News

By: Rick Ackerman, Rick's Picks


-- Posted Wednesday, 27 May 2009 | Digg This ArticleDigg It! | | Source: GoldSeek.com

Rick’s Picks

Wednesday, May 27, 2009

“Phenomenally accurate forecasts”

  

The stock market further distanced itself from reality yesterday as the Dow tacked on another 200 points to the nearly 2000-point gain since early March. It’s hard to say what caused this latest outburst of irrational exuberance. It may have been the news that North Korea had thumbed its nose at the world by testing A-bombs underground. That story dominated the news over the holiday weekend and was said to have been the cause of global “concerns.” Lately, though, such concerns have been the bread and butter of Wall street pros who go bargain-hunting every time stocks sell off. For them, it’s not a case of bad-news-is-good-news, but rather, of all-news-is-good-news.  Yesterday, for instance, the day’s most important economic headline was that home prices are now sinking faster than ever, having registered a 19.1 percent drop in the first quarter. That’s the worst three-month decline since the S&P/Case-Shiller home price index was created 21 years ago.

 

 

Now, one might have thought that such news would cause some sober reflection on the Street, since, as some readers may recall, deflation in the real estate sector was what started the U.S. economy on the path to Depression. But if anyone found this news depressing, it wasn’t apparent in the behavior of investors, nor even among consumers. In fact, Joe Sixpack astounded the rest of us yesterday with the most upbeat consumer confidence numbers since who-knows-when. The Conference Board reported that its index of consumer confidence had risen to 54.9 in May, up from 40.8 in April. The spinmeisters lost no time drawing the wrong conclusion: “While confidence is still weak by historical standards, as far as consumers are concerned, the worst is behind us,” said a spokesman for the Conference Board Consumer Research Center. We prefer the explanation of our colleague Bob Hoye, a student of history who remembers the wild days of the Vancouver Stock Exchange.  "So long as the price is going up - the public can believe the most absurd story," Hoye noted in his most recent dispatch, “Great Depressions Are So Methodical.”

 

A Vacuum of Disbelief

 

And so it goes. We can’t think of a more misleading indicator on which to base the inference that the U.S. economy is somehow improving. Like the Pied Piper of Hamelin, the stock market is luring the gullible toward trouble, presumably in the form of an encounter with risk that will make the economic damage so far look relatively mild in comparison. Nearly all of the gurus we respect think the bear rally is within days, or weeks at most, of drawing its last breath. We think so, too. But as long as we’re all so sure of it the short squeeze seems likely to continue, drawn higher into a vacuum of disbelief.

 

***

 

Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 


-- Posted Wednesday, 27 May 2009 | Digg This Article | Source: GoldSeek.com




 



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