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Boo Dons a Bikini


With the cost of living through the roof and retail sales soft, the consumer is strapped and their ATM machine - their house - is off-line.


I saw her today at the reception
In her glass was a bleeding man
She's was practiced at the art of deception
Well I could tell by her blood-stained hands
You can't always get what you want
But if you try some times you just might find you get what you need.

--Rolling Stones

"Statistics are like a bikini. What they reveal is suggestive, but what they conceal is vital."
--Aaron Levenstein

I've lost track – is it twenty-two out of twenty-five days that marks this torrid pace?

The market moves up on strong and weak economic reports alike. The weakest jobs growth in more than two years deserves a record high. Ditto slow GDP growth. Then there were comments from the New York Fed last week raising concerns about the risk from leverage at hedge funds paralleling levels prior to the 1998 LTCM fiasco, which caused not a ripple of selling but naturally sparked a new round of buying and a new record high as well.

To be sure the market is in the sweet spot. Here are a few comments off the floor last week that reflect the sentiment:

1. When asked are you concerned about a slowing economy and weak jobs growth one professional responded, "I'm sure Bernanke will do what he has to do." The interviewer went on, "Then you must think he will lower rates?" "No, I just think he'll do something."

2. Another floor trader remarked, "Someone's gotta tell me why I shouldn't be bullish!"

3. And then there's this from another floor trader: "Borrowing from Voltaire, this is the best of all possible worlds."

Ironically it was actually a Voltaire character, Pangloss, who said that. And, according to Voltaire, Pangloss is a teacher of "Metaphysico-theologico-cosmoloonigology," or as Nabokov put it, "The word cosmic is in danger of losing its…S."

Be that as it may, if this is the best of all possible worlds, can it get any better?

Speaking of sentiment, there's been a lot of discussion about recent AAII numbers that show a marked level of bearishness amongst individual investors - levels that are associated more with market bottoms then tops.

I don't know what all this means but it is worth mentioning at the same time that normally at market lows, such as the October 2002 low, sentiment is typically extremely negative and fundamental evaluations are much lower than they were at that time. And, history shows both benchmarks typically remain that way for a substantial period of time before a new bull market commences.

Is it possible that there is more time to run to correct the mega bull market of the 1990's (or by some yard sticks a bull market that began in 1982)? Is two to three years enough to correct an eighteen year run? Is it possible that this period, 2000 to 2007, is similar to that of the seven year period from 1966 (at the end of the Go-Go Bull Market) into the false-breakout in the first quarter of 1973?

You can't always get what you want. I can come up with a reason for anything and everything. My take away is that price is the final arbiter. My take on the sentiment numbers is that this is a professionally driven market, not a retail individual investor/trader driven market. My take is that it is a professionally driven rally by guys and gals who get the credit. With the cost of living through the roof and retail sales soft, the consumer is strapped and their ATM machine - their house - is off-line. Buying stocks is probably the last thing on consumers' minds after filling up their tank.

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No positions in stocks mentioned.

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