Bad News From FNMA, UBS Big Loss, Legg Mason First Loss Ever…Market Goes Up. Why? Because We Have To Clear 1383 To Take This Down

May 6, 2008 11:44 PM

The news today was bad, uglier and getting uglier…rapidly. But the market went up anyhow. Why? Because the chart says long unless we can break the trend and the spirit of the longs, who are dead wrong. Buffet said that the recession will be far longer and deeper than people realize. Normally, that would crush the market. It didn’t. I have been saying the exact same thing for months. Dick Green, editor for Briefing.com wrote an article titled The Recession That Never Was” and went on to say that we were not going into recession.

He is dead wrong. I have said many times, this is not a cyclical downturn. It is a fundamental problem of income, debt and cost of living and the three do not match up. Period. Real wages have been flat for 10 years, literally and are going negative. The dollar has fallen 60% in 5 years against the Euro. We are massively poorer as a country relative to the rest of the world. We have 8 million homes that are underwater in value and the number is rising rapidly. Credit card debt is soaring while consumers ability to repay is falling.

I hate to completely go Peter Schiff on everyone, who has predicted an economic collpase in the U.S. for a couple of years, but this is fundamental, not cyclical, and people just do not get it - yet. That is why this has the potential to be the nastiest and longest lasting recession of our lifetime. It may not turn out that way, but it certainly is a very real possibility. Recessions in the 50’s, 60’s 70’s and 80’s were not fundamental, but normal cyclical downturns caused by temporary factors. Real Incomes were growing. That is not the case now.

With that said, the market can - and usually is - wrong for very long periods of time. If you believe in the “efficient market hypothesis”, then Santa should be coming down your chimney in late December. It doesn’t exist and never has. 1383 or that general area, has to clear to the downside to pressure the market I believe. I think it is really that simple as there was ZERO reason to be long today, other than that.

Written by Tom@StockBlade.com · Filed Under General Market Comments

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One Response to “Bad News From FNMA, UBS Big Loss, Legg Mason First Loss Ever…Market Goes Up. Why? Because We Have To Clear 1383 To Take This Down”

StockBlade VS Briefing.com and May 6th Revisted | on July 3rd, 2008 11:48 pm

[…] that post, I went on to say that he is dead wrong because he did not understand what the true problem was, […]

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