Session 31— “Dow 15000, And the Big Disconnect—Wall Street’s Giddiness vs. Main Street’s Pain”

Leave it to the New York Times (which in the article referred to herein sounds more like the Fox News Network) and their reporter, Jeff Sommer, to present a masterpiece of negativity and misinformation.  I believe this story is wrong on both counts. Wall Street is by no means giddy and Main Street may be in much less pain than the article lets on…cause good news does not sell. (link to “Dow 11500, And the Big Disconnect”)

To give perspective, the last time I picked on a piece from Mr. Sommer was back on March 20, when we penned session 8,  a piece we called “A Masterpiece of Uncertainty and Contradiction…”  In the article summers contended that the public was stampeding back into the market in droves (as evidenced by net buying of equity mutual fund shares) and that was not a good omen for stocks.  Of course, the numbers did not support this and probably still don’t. Oh Yes, he also felt that the public was not prepared for the consequences that might befall us if “The Sequester” were not overturned.  The Dow at the time stood at 1397.

Now he asserts that Wall Street is “giddy.”  I’m not sure where he gets this notion.  As an observer and follower of the financial media, it is my sense that poor Sommers is, more or less, repeating the average commentary that you would get if you spend a little bit of time watching the pundits and talking heads on CNBC.  No one can understand why the market is doing so well given the economic backdrop (GDP growth sluggish, unemployment high at 7.5%, Eurozone concerns and softening Asia).  There is very little champagne flowing in the caverns of Lower Manhattan.

Oh yes, the public, they are still scared to death.  I keep contact with several longstanding friends, retail brokers with substantial long-term account relationships.  In light of all that has happened, considering the S & P and Dow at new all-time highs, one confided that it is major work to get clients to part with even small portions of their cash to add to or begin new positions.  The same fellow said he continues to have discussions with clients who are bent on leaving the market altogether.  Another told me that he often finds when he suggests a new commitment; many of his clients push back citing concerns raised on the television that very same morning.  There is no public stampede.  There is no giddiness.

I agree that there may still be lingering pain for some on Main Street who have not made it out of the “Great Recession” whole.  But to generalize PAIN for all on Main Street is to overstate the case.Since 5% percent used to be considered “full Employment”, I do not wish to minimize the suffering of the 2.5 % of us above that number (or anyone below it) who are looking for a job to no avail.  But I accentuate the positive, 92.5% have jobs…jobs they feel may be a bit more secure than 5 years ago.

Since 5% percent used to be considered “full Employment”, I do not wish to minimize the suffering of the 2.5 % of us above that number (or anyone below it) who are looking for a job to no avail.  But I accentuate the positive, 92.5% have jobs…jobs they feel may be a bit more secure than 5 years ago.

• The value of our IRAs and 401ks (if you held on) are back and in some cases higher than they were in 2007.
• Auto sales are cooking and job creation is afoot (not as fast as we might like to see, but it is back.).
• The housing market has stabilized and, according to Case-Schiller, home prices were up 9% last year.
• We are working in an economy with historically low interest rates coupled to uncommonly strong corporate balance sheets + lots of money on the sidelines available for investment.

You get my drift?  I’m not certain there is a big disconnect.

Again, there are always going to some be pains and imbalances, but this is not the pain of 2009.

Now, I am not a Pollyanna nor am I giddy. There are problems out there and certainly the potential for loss.  But, having said that, the risk aversion and fear that still exists in the market place (in light of some very positive developments) does not speak to the notion of our market being over ripe.  Thanks to people like Jeff Sommer keeping bullish sentiment tamped down, it still may be safe to go into the water.  Caveat Sommer and caveat the New York Times.

What do you think?

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