The stock market has been in a total disconnect mode from economic reality over the past 6 weeks all based on the glimmer of hope that an economic turnaround may be lurking on the horizon over next 6 months or so.
It’s too early to tell if yesterday’s sharp sell off means that the markets have shifted back to reality mode, or if this was a one day interruption of the recent rally.
This past weekend, Dr. Housing Bubble had this to about Wall Street being disconnected from Main Street:
The stock market at least in its current form is a horrible indicator of the actual economic carnage falling upon the majority of Americans. Most Americans are witnessing the current rally and wondering why the massive run up (largely in financial related stocks) is going forward while they are getting called into supervisor offices behind closed doors and being laid off or seeing their hours cut back.
Wall Street has completely disconnected from Main Street. It is also hard for many to understand how they are having their limited income being taxed to finance the bailouts of Wall Street and financial cronies while they are asked to do more with less. They are seeing these same institutions, alive because of the massive funding from the American people since our government ideally should reflect the will of the majority, shut off credit lines and raise rates while the government through the U.S. Treasury and Federal Reserve showers the banks and Wall Street with easy low rate financing thanks to the American taxpayer. Welcome to the new America. Where unemployment is good news for Wall Street and bailouts are now seen as a new source of revenue for financial companies. New accounting students will learn how to incorporate bailout funds as a new source of revenue.
It is easy to turn a profit when trillions are funneled into the financial system. This is like jumping into the blue ocean and being shocked you got wet. Yet the problem of course is very little of this money is trickling down to the real economy; you know, the economy that doesn’t involve Bloomberg Terminals and pinstripe suits? Imagine a giant person eating at a table and the mice are running around on the floor hoping to pick up the scraps. Guess who the mice are?
The last few weeks have been great for the financial companies because they are now operating in a pseudo reality that is for the privileged few. These are the new financial overlords and all it took was the collapse of debt to show them for what they truly are. Many people for the last few decades have confused debt with actual wealth. That is a mistake we are now coming to terms with.
As always, Dr. Housing Bubble is right on with his observations, and I suggest you read the entire article if his viewpoints resonate with yours.
I still believe that this rebound over the past 6 weeks is a classic bear market rally. If you were fortunate enough to participate, and you regained some of your losses, you are well advised to implement some kind of sell stop discipline in case we are heading back south with the long-term bearish trend resuming its course.
Comments 4
Ulli thanks for your service you provide. I am interested to see the markets reaction when the malls are all empty. I feel bad for the buy and hold investors that are trying to get back even when they are still 40% down from the peak. I turn them on to your service but can never find investors interested in protecting their wealth.Thanks again Snoobers
Hi,
What Anonymous said above is eactly what I find and that is every trader I know must think they are much smarter than they really are when it come to the market. Most don’t protect themselves during bear markets. They seem to have the buy mentality no matter what phase the market is in. No concept of trend timing either. Maybe it sounds better to their friends to say they are always buying something rather than telling them they are on the sidelines or short (bear funds) rather than feel ridiculed by them.
I think this definitely is a bear market rally. I wonder every day when the market will turn. The market is reacting to hope and emotion to carry it rather than the facts of the economy being on “life support,” huge unemployment, high inventory, bad earnings (couched by saying pre-imtevely that earnings are going to be bad). So, I agree and am amazed that the stock market has been in a total disconnect from reality. I fortell a big crop ahead, when investors wake up and “smell the coffee.” Times are bad, not only here but worldwide, and they will eventually affect the U.S. stock market. I am amazed that the market has gone this high, in such a short amount of time. I guess people’s hope and emotion are carrying this rally rather than facts. It’s like a river, as I’ve said before, but I peronally do not want to get into the river, at thks time, as I believe that unknown “whirlpool” lurk, whick can suck you under and “drown” you. I thin staying on the sidelines in MMAs or hedged funds, like Ulli’s are the best way to go.
I apologize for the spelling, in my post. I should have previewed it. Sorry about that.