Today's Daily Reckoning:
Mr. Bear! That sly fellow...just when you think you've got
him figured out, he does something unexpected.
Yesterday, for example, we were pretty sure we'd see at
least another bullish day on Wall Street. The Dow is far
below its moving average. Prices have been falling day
after day, month after month. It was time for Mr. Bear to
let up.
Not out of a sense of mercy, of course. Au contraire, with
malice aforethought! Investors were getting edgy,
panicky...it looked like they would soon pack up their
picnics, jump in their cars, roll up the windows, lock the
doors, and rush out of the stock market. If they had done
that, prices would crash and the bear market would be over.
But this is no ordinary bear. This is Ursa Major...the kind of animal you see once in a lifetime. Instead of backing off...the great bear came out again yesterday, reared up on his hind legs and ripped into stock prices.
We stand back - well out of range - in awe and wonder. We
have the feeling we are witness to something remarkable.
The greatest bull market in history is now being followed
by the greatest bear market. And the biggest boom seems
likely to be followed by the biggest bust too.
In the economy as in the stock market, people who still
have their wits about them should be making a getaway.
Consumers, already carrying the heaviest debt loads ever,
should be taking off their knapsacks and chucking out
unneeded items. When you are running from a bear, you want
to be as light on your feet as you can be.
Instead, yesterday brought news that the poor hopeless
schmucks were standing in line to get bigger mortgages;
there were a record number of mortgage requests last week.
Refinancings at lower mortgage rates typically help cash
flow even while they make the balance sheet worse.
Consumers end up with a bigger mortgage, but lower monthly
payments. But recently, a hint of desperation has crept
into the refinancing statistics. "They're refi-ing to get
another $40 a month in their check," reports Michael A. J.
Farrell of Annaly Mortgage Management. "Why is that? We
think it leads back to economic weakness."
How can we help these people, dear reader? Or investors who
rush to join every rally in the stock market? We don't
know... |
