Market Musings
There is no question that we all would like to see a strong stock market. In theory, a higher market should be reflective of a better economic outlook, and if the economy is prospering, then, as a whole, society should benefit. Unfortunately, the current market is not reflective of a strong economy and more likely reflects the wishes of policy makers who see a higher market as a sign of prosperity.
I guess my point is that our policy makers have so much vested interest in being seen as right that they are willing to do whatever it takes to make themselves and their policies look right. The stock market has become that vehicle where success or failure of a policy is judged. "By all means necessary" is the policy of our economic leaders, and whether it be by capital infusions or money printing, jawboning, changes in accounting rules, or fudging of the economic data, there is one goal: keep the stock market higher.
From a big picture point of view none of this is good as structural issues are ignored, and capital and investments are mis-appropriated. But that day of reckoning seems to be a long ways away as the "can has been kicked further and further down the road".
In any case, the actions of our policy makers have become a real headwind to the market rolling over; it makes it difficult to bet against the market. There is nothing they do or say that will harm the markets and one could argue "why should they?". But we all know that at some point we must grow up and take our medicine.
Nonetheless, the dynamic I wrote about several weeks ago -- an overbought, overbullish, and overvalued market that should rollover v. POMO (i.e., policy maker intervention) -- continues to play out. At this point, there is no clear winner as prices are about where they were from a month ago.
I am still sticking with the data. It is always tough when betting against the stock market. It is just not normal to bet against America, hope, American innovation and all that other stuff we have been forced fed over the years. But these aren't normal times. We have an additional "force" to contend with. Betting against the market is even tougher.
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