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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

October 10, 2011 at 9:55 AM

Bulls and bears: Digging into the reality of a rally

Is this rally real or just more of the money-making denial of the Wall Street Boyz? Fund manager John Tobey argues that last week was a turning point: No worse news emerged, the market hit bottom and the only way to go is up. Emotions also play a role:

We have gotten into a pessimistic environment, augmented by the “lengthy” distressed market period (it’s only been two months, but it feels longer). The market can rise nicely from here, not by investors becoming optimistic, but by simply becoming less pessimistic. I say “simply” because pessimism is not a natural state for human beings. People pursue happiness and will gleefully throw out dark thoughts as soon as there is a glimmer of improvement (or normality).

Financial advisor Roger Nussbaum says we’re still in the early stages of a bear market.

As you know, I say it’s rarely clear what the market’s moves mean on any given day; they are the product of millions of decisions based on varying degrees of information and search for advantage. So, sure, today’s move may be partly based on a sense that “Europe is getting its act together.” But that’s just today. In reality, the sickness in Europe’s banks remains — Dexia passed its stress test just a few months ago and now its sinking. Another danger signal is China infused $400 billion into its ailing banks.

This is far from over, and the fear-vs.-greed dynamic will make stocks volatile, with flash trading only adding to the swings. Little of it will be beneficial for average investors caught in the headlights.

And don’t miss: How to Explain Greece to a Complete Idiot || Sovereign Man

And Obama’s Job Creation Panel Includes Job-Cutting Execs || LA Times

Today’s Econ Haiku:

Koch brothers freedom

Free-fall for U.S. incomes

Koch, it’s the real thing

Comments | More in Banking, China economy and business, Eurozone, Stock market

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