Meanwhile, the U.S. government is basically broke. State and local municipalities are floundering in the red and laying people off. Other than wild speculation in housing, there is not much to point to in terms of economic strength. In fact, all those folks who believed that the previous stimulative effects were working are now counting on another Fed rate cut at the end of the month to bail them out. But they never explain why the 13th cut should work when the previous 12 have done nothing, or the previous tax package did nothing. Things are a mess, and they're not going to get any better because Al Greenspan cuts rates again.
Bulls in extreme, bears in exile
The fact of the matter is that the stock market rally is just a bear market rally, like all the others have been, grounded on nothing more than hype and hope. In that same vein, sentiment has swung a long way. Last week, Investors Intelligence reported its latest survey of investor sentiment shows that bulls are up to 58.7% and that bears are down to 16.3% -- the lowest reading in 16 years. Before this rally began in February and March, when I was constructive about the prospects for a rally, I said to friends that I thought before it was all through, the bulls would get to 60% and the bears would be in the teens. Well, I'll take last week's statistics, declare victory and move on. Sentiment is about as lopsided as it gets. Folks who are partying on the long side better have a plan to get out early, because when everyone finally decides they need to hit the exits sometime later this year, it's going to get mighty crowded.
That brings me to a quote I'd like to share with readers: "It is apparent that the public preference for stocks is not only as marked as ever, but also, the will to speculate is still a speculative factor not to be overlooked. The prompt return of huge speculation and the liberal manner in which current earnings are again being discounted indicates that it will be difficult to quench the fires of stock market speculation for long."
Well, maybe not that long. This quote came from "The Trader" column in Barron's, published on March 24, 1930. The high of that bear market rally was less than a month later, on April 17, from which the stock market plunged for the next 18 months to its ultimate lows. So, the denial trade, while bigger and more pervasive than ever, is not unique to the 21st century. |
