“Can I be honest with you?”
I hate it when people ask me that. As if I’m going to respond, “No, lie to me.”
But the truth is, it’s usually a preface that suggests we’re not going to want to hear what we’re about to be told.
So… can I be honest with you?
I have no idea what’s going to happen in stock markets or bond markets this week.
We are at a critical juncture for both stocks and bonds, and this week might be huge.
More truth after the break…
I said it the other day, and I’ll say it again.
The markets are broken.
It’s not that they’re not functioning on a daily basis, pricing risk and assets and performing their price discovery duties. They are doing that – or at least trying to.
Those are the little, daily things that markets do, and there are things there that are broken. (I’ll get to those things another time.) Think of those little things as the “hows” or the “mechanics” of buying and selling.
Think of the big things as the “whys” or the “psychology of investing.”
Those are the things that are broken.
Until they are fixed, or “things” change, drastically, we are in for some really wild swings in the months, quarters, and years ahead.
I’m going to point out all of these big things to you, over time. But today I’m going to point to just two.
For the past five weeks, it’s been treat after treat for bullish investors.
The “trick” will be seeing if it can last…
How sweet has it been?
The Dow rose 1,459.63 points in five weeks to end Friday at 12,231.11. The Industrials rose 3.6% last week alone. They’re up 14% in that short run, and we’re now up 5.7% on the year. The S&P 500 is also up 14% over the same timeframe, and the Nasdaq has been following dutifully.
The candy being held out has been the hoped-for resolution to all of Europe’s problems. Every little sign of forward movement burned the short tails of greedy bears hoping for a sovereign default and raging contagion.
On top of progress across the pond, earnings here at home have been another treat. Of the more than 300 companies in the S&P 500 that have reported third-quarter numbers, 71% beat analyst expectations.
The trick now will be seeing if it can last…