Friday, June 15, 2012

What has become of the markets?

Once upon a time, supply and demand ruled the markets. Supply of shares for sale vs. demand for the prospects for the company's success in the future. We had a a capital asset pricing model and we discounted future earnings and dividends back to the present. Of course, all of that came with a lot of assumptions so a technician like me was not a big fan.

But even I long for those good old days. At least there we had a market that operated under its own power or lack thereof.

Let's list some of the fundamentals that came out recently:

worse first time jobless claims
worse consumer sentiment
worse industrial output
worse NY region factory output
worse retail sales
worse foreclosure starts
worse growth in China
worse current account deficit

As a technical analyst, seeing the stock market rebound as all of this comes out should make me bullish beyond belief. It would mean all the crap is already baked into the cake (yummy!). It would mean a ginormous wall of worry to climb. Any positive spark would light a fire so big Smokey the Bear would relent and get a bag of Jet Puffed and a weenie on a stick.  Admire thine enemy.

But the reason stocks are going up is the specter of rescue. Michael Gayed wrote today that "SuperBen and the League of Extraordinary Bankers are getting their suits on." Free money! Bailout! Save me, sugar daddy!

We have a stand off. Bad reality vs. awesome hope.

But we've already had a taste of what can happen if the market brat does not get what it wants. It throws a hissy.  You tell me how they are going to teach this at conservative investor school. Why Mr. Investor, when you are planning for conservative growth in your retirement account you must keep track of what some idiot is Greece said and of course be ready to reverse course when some idiot in Iran says something. Forget which company has a better business model.

The idea of buying that juice bar in Key West gets more attractive every day.

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