Bull Market in Happy Talk
Thu, 08/30/2007 - 11:47 — moneysageWell folks, we have to admit it। We are starting to get that happy, happy feeling again. In fact, it feels like we may have had just one too many. "All's Well" on the credit market front, or so we keep hearing. Indeed, we sense a rising tide of optimism. So much so, in fact, that we wonder if reality is not about to be swept away, to be replaced by something much, much better.
Yeah, you guessed it। Our call here is that our earlier prediction of an ascent in the level of feel-good talk is in fact occurring now. As we noted earlier, the crescendo is still ahead. Skeptics that we are, we are wondering when the next BIG SHOE will be dropping.
A selective heading to the hills is in order, we think। Stocks outside of the real estate/financial/consumer nexus look good, based upon fundamentals and the premise of a forthcoming torrent of FED easing. Treasuries look appetizing. Other "asset classes" don't look so hot, in our view. As for the economy -- well, better not be low man on the totem poll.
The more happy talk WITHOUT DECISIVE ACTION from the FED, the worse things will ultimately get। We do not believe that magical incantations and mass repetition of FED-inspired airiness can be a substitute for action. The more time and political cover the FED can buy via a torrent of happy talk, the more severe the ultimate consequences for the economy. In plain English, the more the FED succeeds in its PR campaign, the more it will ultimately fail.
It is dangerous to play with fire. It is equally dangerous to lull yourself with words which conceal, rather than reveal reality. The FED needs to act like the determined physician it is supposed to be. It needs to reverse its regression to voodoo doctor. And journalists -- well, they need to act like journalists, rather than the chorus.
