Sunday, April 26, 2009

Stock Market Review - 04/25/2009

Dear Mr. Fantasy

'Dear Mr. Fantasy play us a tune
Something to make us all happy
Do anything to take us out of this gloom
Sing a song, play guitar
Make it snappy'

This is the opening verse of a song by Traffic titled 'Dear Mr. Fantasy'. Aside from the brilliant guitar work of Steve Winwood, I think the lyrics are very applicable to our current stock market. Mr. Fantasy in our case is of course, our new leader, Mr. Bernanke. There is terrible economic gloom all about the globe and our stock market has become our worst nightmare. We can't take the pain nor can we accept the reality that our financial system has bankrupted itself and our politicians' solutions have been to bail the financials out by bankrupting the rest of us. We also can't handle the truth. But here it is anyway. Avert your eyes if you are sensitive to raw truth.

We all want to think of the stock market as a trip to Las Vegas where we will play poker to the wee hours of the morning and rent a van in the morning to take our winnings back to our home base. But, we don't want to have to study the game of poker nor do we want to bother ourselves with the rules. We just want to sit at a pretty table and look at the pretty cards that are dealt to us satisfied with our oblivion as to the meaning of any of the faces on the cards. We want to toss our chips into the pile in the middle of the table and then rack in the winnings. To this we are owed. It is our right. We are stupid Americans and Europeans and Asians. Through our 401(k)s and online accounts we want to direct our investment cards and garner great rewards from Wall Street. But, we don't want to know anything about the process. Or, we want to think that we know what we are doing. 

Then comes the smackdown. We have ultimately lost and we have to consider that we are not as rich nor as smart as we thought we were. Just because we have the capability of filling out a new account form and writing a check to establish an investment account, we believe we have boarded to train of affluence. Now the train has plunged down a ravene and taken our retirement plans with it. Do any of us have the skills to operate in a declining stock market?

Of course not. Well, some professionals do but it takes serious training. Enter Mr. Fantasy - Ben Bernanke. Wave the magic wand. Give us our money back. Make it better. Please. Do anything. Yes, take over the government. Print money like a drunken Zimbabwean. Let corporate America re-cook the books like they did in the good old days. Presto! We are cured! Banks are now profitable again now that 'mark to fantasy' accounting has been re-instated. Ford lost a billion and burned through less cash than expected and it rallied 20% on the news. Bernanke threatened to fire the CEO of Bank of America if he didn't play along with the saving of Merrill Lynch. His right-hand man, Tim Geithner, continues to produce acronymic saviors like TARP and TALF and SCAM. All of it from the land of ridiculous but we like Mr. Fantasy a lot more than Mr. Truth. 

Meanwhile, our largest car manufacturer, GM, is preparing for bankruptcy and 15% or so of us are preparing to go look for a job that we don't currently have. Our standards of living are dropping and our government is mesmerized with a 'save the financials' approach that is devaluing our currency and ultimately all of our assets. Brilliant! In their belief that they can rescue everything, our government is involved in a near daily manipulation of the stock market. Look at the chart below and you can clearly see the pronounced spike in volume at the beginning and end of every day. Every drop is met with a powerful spike higher. The market needs to clear the Dow 8000 level very quickly or we risk a resumption of the bear market. 

Please Mr. Fantasy - play a tune, sing a song, just make us happy! We'll give up our freedoms and rights and Constitution and surrender to your will. Only our profound stupidity makes us believe we know how to invest. The stock market always goes up, right?

The DIA 5-day 30 minute bars week ending 4/24/09
Stock chart courtesy

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