Wednesday, September 16, 2009

I Like This

. Wednesday, September 16, 2009

Even though I typically loathe newsletters---this is a promo I received from "the boys" that was a dead on classic---

time to pay attention---

It's unanimous: The bear market is over, and a new bull market is back!

At least that's the conventional wisdom of the top 55 U.S. economists, who predict that the economy will grow in the fourth quarter through the first half of 2010. (All but one of them expect growth this quarter.)

Rewind to February-March of this year ...

... When those same economists reported that the economy was in "the worst recession since the Great Depression."

That's also precisely when stocks and commodities rallied.

Now, six months later, even the Fed chairman has declared the worst is over.

What's changed?

In a word: psychology.

The natural flow of investor psychology has traced out a recognizable pattern. As optimism builds, so does the perception of a recovery. It's to be expected -- even predictable. After all, the simple truth is that investors, advisors and analysts alike herd. Positive price action -- in their minds -- begets other positive action. It's all-too similar to the optimism we observed in late 2007, when various markets stood at or near their all-time highs.

But today not even the so-called fundamentals support the notion of a recovery:

  • Large pockets of the U.S. real estate market, including metro Atlanta, are still racking up record monthly foreclosures.
  • The global shipping industry has slowed to a crawl; thousands of ships around the world sit empty and idle.
  • Bank credit and the M3 money supply have been contracting at rates comparable to the onset of the Great Depression.
  • And believe it or not, reports are surfacing of lending institutions returning to their old tricks from two years ago.