Headed into Friday’s action, the Standard & Poor’s 500-stock index had gained 2.42% on the week, and is adding on further gains Friday despite the horrific employment news. The market has also shrugged off a release from the Organization for Economic Co-operation and Development, which noted that its composite leading indicators are at their worst levels since the 1970s, with most economies deemed to be suffering a “strong slowdown.”

“You gotta love the Street: two hundred S&P; CEO’s come out the last two weeks saying things are worse than expected, worse than they’ve ever seen, can’t say how bad it will get, and all we talk about is stabilization because pending home sales ticked up and ISM wasn’t in the thirties,” says Kevin Flynn, president of Avalon Asset Management in Lexington, Mass.

The bits of good news in the past two weeks have been minimal. They can be classified as opinion (the Institute for Supply Management’s surveys, along with Germany’s IFO survey of business sentiment, both of which showed improvement from extremely depressed levels) or hope (expectations for a stimulus package and further progress on the bad bank plan). That has lifted the spirits of investors, for as David Kotok, chief investment officer at Cumberland Advisors in Vineland, N.J., says, “markets like clarity and certainty even when the policy is not the best.”

However, unlike in mid-November, sentiment indicators do not reflect the same level of worry that persisted during that volatile period. Certain sentiment indicators, such as Investor Intelligence’s bull-to-bear ratio, shows about an equal number of each, compared with late 2008, when bears were dominant. The equity put-to-call ratio still reflects a bearish position, but a less extreme one than at the end of last year, and volatility indexes have shown substantial declines — the Chicago Board Options Exchange Volatility Index was lately at 42.32, not far from the lows of the year.

In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clark, President of General Motors North America …

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new “messiah”, Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”. Believe me folks, The dream is over!

This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time t hat our factories have been filled with the worlds most
overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities, this dream where you still think the masses will line up to buy our products for ever and ever.

Don’t even think about telling me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s throughout the Midwest during the past 30 years and what I’ve seen over those years in these union shops can only be described as disgusting.

Troy Clarke, President of General Motors North America, states: “There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not.”

You’re right Mr. Clarke, it’s not JUST management, how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag a** so they can come in on the weekend and make double and triple time for a job they easily could have done within their normal 40 hour work week.

How about the line workers who threaten newbies with all kinds of scare tactics for putting out too many parts on a shift and for being too productive (We certainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we?!?).

Do you folks really not know about this stuff?!? How about this great sentiment abridged from Mr. Clarke’s sad plea: “over the last few years we have closed the quality and efficiency gaps with our competitors.” What the hell has Detroit been doing for the last 40 years?!? Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke!

We are living through the inevitable outcome of the actions of the United States auto industry for decades. It’s time to pay for your sins, Detroit.

I attended an economic summit last week where brilliant economist, Alan Beaulieu, from the Institute of Trend Research , surprised the crowd when he said he would not have given the banks a penny of “bailout money”. “Yes, he said, this would cause short term problems,” but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day and the following very important thing would happen, where there had been greedy and sloppy banks, new efficient ones would pop up; that; is how a free market system works, & it does work if we would only let it work”.

But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn’t work – that we need the government to step in and “save us”. Save us my a**, Hell – we’re nationalizing and unfortunately too many of our once fine nation’s citizens don’t even have a clue that this is what is really happening. But, they sure can tell you the stats on their favorite sports teams, yeah – THAT’S really important, isn’t it?

Does it ever occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?… How can that be??? Let’s see: Fuel efficient! Listening to customers! Investing in the proper tooling and automation for the long haul!

Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning! Treating vendors like strategic partners, rather than like “the enemy”! Efficient front and back offices! Non union environment!

Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know down deep in their hearts. I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself i nto – my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) – I make them stand on their own two feet and accept the consequences of their actions and work through it. Radical concept, huh? Am I there for them in the wings? Of course – but only until such time as they need to be fully on their own as adults.

I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins. Bad news people – it’s coming whether we like it or not. The newly elected Messiah really doesn’t have a magic wand big enough to “make it all go away.” I laughed as I heard Obama “reeling it back in” almost immediately after the final vote count was tallied, “we really might not do it in a year or in four”. Where the Hell was that kind of talk when he was RUNNING for office.

Stop trying to put off the inevitable folks. That house in Florida really isn’t worth $750,000. People who jump across a border really don’t deserve free health care benefits. That job driving that forklift for the Big 3 really isn’t worth $85,000 a year. We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe. That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home.

Whatever happened to some of these great storied opportunities and pearls of investment wisdom? How are they holding up in today’s market?

Let’s take a look:

True over the long-term, but Asian stocks now move in synch with U.S. stocks. The customer must grow to be able to buy in quantity from the producer.

It’s wishful thinking to get advice from inexperienced sales representatives of firms that went bankrupt for creating troubled assets (which are no longer worth even a fraction of their original value) and “eating their own poison” by foolishly keeping them in their portfolios.

If your advisers don’t want to work enough to change your domestic asset allocation, why expect them to understand international investing?

There is little academic research on risk tolerance. Risk tolerance is a sales pitch based on your ignorance of investment risks. It is all about having you tell the adviser about what you are afraid of and what you can be convinced will address your concerns — not the odds of investment success.

The 1938-42 span might be a likely scenario for the stock market with volatile, zig-zag drops and rallies but no net progress, as Louise Yamada explained here yesterday.

Unsatisfying and frustrating as that might be, it still would be a lot better than the plausible alternative — further declines in the major averages through the lows of the last bear market of 2002-03, according to the long-time market watcher and head of Louise Yamada Technical Research Advisors.

What’s not likely to happen is the more certain prediction for 2009: a revisit to the old highs any time soon. A year ago, she warned her clients that a major decline was underway. After many stocks and commodities had parabolic rises, with the help of leverage of 30 times and more, the withdrawal of that leverage has made for the dramatic declines.

Even within bear markets, impressive rallies of 20% or more are prevalent prior to stocks reaching their ultimate lows, which was the case from 2000 to 2003, Yamada observes. But they’re only suitable for nimble traders to play.

Indeed, the hopes that buying opportunities can be perilous to investors. It wasn’t the Great Crash that wiped out stockholders in 1929; it was the subsequent wrenching declines into the ultimate 1932 lows that did in the bottom-pickers, she points out in an interview.

Despite the bounce off of the market’s Nov. 20 low that took the Standard & Poor’s 500 up 24% to its recent high of Jan. 6, Yamada says there has been too much technical damage from the massive declines from the 2007 highs (47%-55% depending on the index) to consider this anything but a bear-market rally. “There is a long repair process ahead through 2009, assuming we have even seen the ultimate lows,” she writes in a report to clients.

Indeed, she says the S&P; Nov. 20 close took out the old lows. Similarly, 13 stocks in the Dow 30 also have broken their 1002-03, as has the overall Dow when adjusted for inflation.

Moreover, even “outperforming” groups merely have gone down less than the major averages. Health-care stocks, typically a defensive group, have broken down and have formed a massive top, she adds.

Beyond the need for recuperation, there are no groups that are prepared to lead a new bull market. Those typically are industry groups that have years building bases from which to launch a new advance.
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While traders might be able to play volatile swings, the parabolic rise in the bull market can result to an equivalent overshoot to the downside, she warns. That tendency leads her to prefer to protect capital in this treacherous market environment.