the general econasty


Oh ye sweet banks. Sauntering boldly forth with zillions of “dollars”, leverage-trading your hard-won tax dollars from zero interest to balance sheet safety, when you are not busy selling back treasuries to taxpayers at a tidy risk-free profit or lending to consumers at exorbitant, unjustifiable (as they used to say, “usurious”) interest rates or fighting to keep from cleaning up the mess you made of mortgage law or fighting to keep any new laws from taking effect by buying the entire government with said tax dollars and hapless balance sheets or just generally making everyone hate you by being such total assholes about your pivotal role in the most exquisite economic and financial disaster in several generations. When you’re not busy with that little laundry list, you’re… well, mainly you’re just still charging people three or six bucks to grab a twenty from a machine. Sorry, I looked for something nice to say, but my cupboard was emptier than that “viable long-term business model” folder in your Executive Filing Cabinet. You are a thundering herd of smelly poop. Go away, Suzie, we don’t want you any more. And lately, at the head of your smelly little stampede, we find one see eeee ohhhh of JPMorganChaseMorganJPChase or however they’re spelling that these days, the Right Honorable Mr. Jamie Dimon.

We’ve all forgotten of course, but waaaaaay back in March aught eleven Sir Dimon read us all the riot act in a masterful fit of whining about how we were getting it all wrong. Which of course we are, but let’s not get ahead of ourselves. Today, at what was supposed to be an orderly press event in which our glorious Fed promised our other smelly little stampede another six months of baseless market profit, Jay-D was back with The Same Thing Part Two. The video is hardly the thrilling takedown the link is calling it, and if you want to skip it, thus winning six or seven minutes of your life back better spent straightening the bristles on your favorite backup toothbrush, all you need to know is…

Speaking of laundry lists, he reads a long one to El Bernanka, in this sort of weary, gosh-you-just-don’t-get-it voice, of all the things that have come forth to crush the poor, persecuted banking industry since the aforementioned eco-financial clusterfuck. Then finally (around minute 5 or so), he gets to his “question”

Has anyone bothered to study the cumulative effect of all these things? And, do you have a fear like I do, that when we look back and look at them all, that they will be a reason that it took so long, that our banks, our credit, our businesses, and most importantly, job creation start going again? Is this holding us back again?

Which is of course not a question at all, but a further restatement of the same complaint: business good, regulation bad, Papa Jamee Knows Best. I suppose he feels he is qualified to make such complaints because “his” “bank” had the distinction of being less insolvent than its peers. Suuuuper. Didn’t stop MorganJChasePMorganDidWeMentionMorgan from puckering right up at the government teat factory, now did it? You can read me all the laundry lists you like, Dimon Jim; doesn’t change the fact that the crisis isn’t over, because nothing is addressed, because all those little rules you mention aren’t being enforced, won’t be enforced, and wouldn’t break the vise-grip hold that the financial services industry has on what might otherwise pass for a mediocre-but-no-longer-teetering-on-a-cliff-even-if-still-destroying-lives-as-fast-as-business-can-find-a-way-to-turn-life-destruction-into-shareholder-value economy. “Job creation” became “job destruction” not because of regulation, but because of the peevish and shortsighted severing of the employee nose from the corporate face. It’s pretty simple, but we keep talking about it as if in the collapse or the subsequent “rebound” rocket science has been performed, or even reinvented. This is a gift of the financial services industry, which knows that, as long as they can make what they’re selling sound complicated enough, no one normal will bother doing the math.

Right near the top of that laundry list was the claim that “all the bad actors are gone”. I suppose that in the grand tradition of rhetoric, JJ Dimebag felt the need to get the most indefensible point out of the way first. How can the bad actors be gone, when we’re still being subjected to the insufferable bleating of the man who horsewhipped the efforts of the bank he’d taken over to further sell and develop their pièce de résistance, namely, the invention of the OTC derivatives market and, by extension, the fluff-piece self-defense/self-justification that is “financial” “product” “innovation”? (Seriously, skip the video but read the book, it’s worth it.)

Do you fear, J-Dim, like I do, that when we all look back and look at all of you, you will be THE reason that it took so long, that your refusal of responsibility, your narrow-minded protection of your own self-interest at the expense of the whole wide world, and most importantly, your temper tantrum at being asked to act like a grown-up fucking bank instead of a frat boywho got blasted out of his tree just in time to be handed illusory and rules-free control of his own trust fund, for us to start living again? Have you studied the cumulative effect of yourselves? Are you going to hold us back forever?

Entity: Sir Jay-Jay “Jamie” Dimestore “Dimon”

Rating: Go thou and fuck of thyself

Rating Vector Derivative ACRONYM Factor: Stronger than 3:56 P.M. trader B.O.

(Scroll down if the linkfest is all you’re after. Herein there be rants.)

Technical analysis is a fascinating discipline, for its all-or-nothingness. Friday’s dull action (after a furious open, anyway) ended up with an insane close. Problem is, if you’re a technical dude(tte), you must incorporate what is unquestionably a very unusual moment as if it were just run-of-the-mill. This is so damn stupid. Let’s say I’m an investor with ten billion bucks or so on the sidelines. If I pick one split second, and bring that ten billy in just plain ol’ basket/market/futures buys, I can wreck all the charts. Yours, and yours, and yours and yours and yours. Meanwhile, if you’re a TA dude(tte), you just shuffle your charts, redraw your trendlines, and go, “Uh-huh, uh-huh, look what the charts just did. Revelation!

Before I get to the this weekend’s many analyses, I’m gonna make one last case for sanity vs. tape. This is not the moment, no doubt–we are, and have been throughout this calendar year, in crazy market times–but this is very near the end of that road. Various huge trendlines doing the lightsaber thing, etc. etc. The comforting thing for someone who has felt as wrong as I have for so long is that this coming week or so, we either (a.) get wrong at a hyperbolic level, which can’t be fought because it’s hysterical idiocy and mob rule and you either get dragged along or trampled, or (b.) we give up on the idiocy, in a temporary-but-with-conviction way. There is no more “Uh-huh, uh-huh, let’s just push along.” Even I, at this overlate date, would prefer a decision.

Meanwhile, here’s my last, last, last plea for reason. A lot of people–better traders, and smarter analysts than Unexpectedly, Inc. employs–will tell you that this rally could keep on rallying just cause it hasn’t broken down, and now it has “been basing”. May was a “consolidation month”, and blah and blah and more blah. The problem being, we have built, and continue to build, a tremendous castle in the air, whether the macro way or the TA way tempts your faux-samurai soul. I shall label this period “freebasing”. Bull market? In the wettest dreams of the weakest mutual fund managers could this be the case. Power bear-market rally? You bet. Huge. Stupidly huge. Anyone who tells you they knew it would be this huge and they rode it the whole way is, by necessity, a fool. This “wasn’t supposed to happen”, any more than the January-February breakdown was. Any more than the previous rallies in November and January were to fail. And so on, and so on. Problem with this current rally blob is, in the intermediate term, it could double this hugeness of error. Wrong side of that trade? No thanks.

But it’s really very simple to think through: if you “consolidate” for two or three weeks off the blow-off top of an overcorrecting few-week bounce that did not for even three successive days pause to consolidate, you consolidate on nonsense. Can the markets push higher off of nonsense? You betcha–America adores nonsense. We have enshrined it via application of a technology we call “television”, and one thousand assorted derivative products you can’t blame on Wall Street (not to mention the hundred or so proudly offered at Street HQ). Will I throw in my long-ailing shorts and hop on the idiot bus? Short-to-intermediate term, why not? I already carry America’s idiocy obsession home with me, eight nights a week.

But if the market gives said idiocy its stamp of approval, I will henceforth do so with tremendous sadness, and it has nothing to do with the “money” I’ll “lose” from temporarily giving up “intelligent” trading. This market is in every way a failure of measurement. Of anything, and while traders love to blame the government, I see no reason to blame anyone but the traders. Friday’s ginormous stick close is the cherry on the faux-cream top of the no-fat ice cream sundae of nonsense tape meant to be swallowed whole as gospel. We are long past any sort of transparent, accurate measurement of any sort of actual economic activity. We are trading against each other, big vs. small, small vs. miniscule, nothing vs. nothing vs. nothing.

This is pretty egregious, because the anti-government, pro-market forces that never STFU in tradingland would claim that markets know better. (See: like, every post on this blog.) We have a market that, for months, has acted the part of the idiot child to perfection: As the news got worse, it exaggerated the worseness, and as the news stopped getting worse, it freaked out, peed itself with joy, pounded the pee into a commodity, and is now hiking trow to pee down the other leg.

Someone, some day, is going to have to do the laundry. Once again, people who spend their days working and not watching the so-called free markets at their quaint little circle jerk stand to lose the most, via passive investment managed by people who just don’t give a fuck as long as they get salaries, bonuses, and bad haircuts to match their sizzling Docker-Oxford combos. (Make sure your belts match your shoes!) What is so humorous about this is the way these same market-watching, market-loving managers who–seriously, they’re like $GM employees–really just don’t give a fuck about “productivity” (find that in their job descriptions) whine and kvetch about growing deficits, failed government, blah blah blah without adding any insight, as if they-the-Street were keeping their own house in perfect order, only to be failed by all around them in a great travesty of  economics pillaged at the hands of… of… AAAGGGGHHH!! CONSPIRACY!!!!

You, mutual fund manager, program trader, Wealth Manager, Algorithm Man, are the great travesty of failed economics. Sit around in your “pit” or in front of your “Bloomberg terminal”, making your oh-so-meaningful “buys” and “sells”, and keep on moving those markets or watching your golf buddies do it, yelling at everything and everyone else all the while, especially anyone who might find your artful and endless tax dodges less than honorable. Everyone is listening to you, at least very, very temporarily.

The failure to accept responsibility is an across-the-board problem, unsolved by Wall Street or Main Street or Any Other Damn Street you can name in the Grand Ol’ U. S. of A. today. Tomorrow, June 1, 2009, we will point at what the markets do–we will cite that action in our newscasts and hourly briefings–and we will comment on it, as if it told us something true. Yes, as the bloggers keep drooling, it’s the curse of Interesting Times, and while some people can sum that up eloquently, it’s also the most facile cliche available to an uncreative mind in the face of the greatest opportunity for creativity–financial, economic, political, or otherwise–we have seen in two or three generations. Instead, we have the finest alignment of trader-thinkers all sitting around going, “Well, we go higher from here, unless we don’t,” in vast useless money-making/-losing chorus.

We have no truth left. Put that in your tape. Play that for a fabricated dollar or two. May you live in speculative times.

Without further ado, your recaps:

  • Tickerville (video chart analysis, ~20 mins, a great session, seriously–highly recommended)
  • Posse/FINZ.tv Trade Journal (charts plus comments, new, see rant above)
  • The Chart Pattern Trader (video chart analysis, ~30 mins, sounds like it contradicts most of what he said all last week, but hey, “interesting times”)
  • Cobra’s Market View (charts plus comments/rules)
  • Market Talk (summary, no charts, might be four sentences this time around. They sometimes have great synthesis; apparently this week they had a beach date.)
  • Random Roger’s Big Picture (video investment-oriented thinking, very macro, still smarter than you, ~6.5 mins)

Good luck out there.

This morning, the ordinarily coherent and insightful Barry Ritholtz featured a letter from $GM supplier Gregory Knox in reply to the $GM mother ship’s request for “support” and “urgent action” on $GM’s behalf from its fiefdom. What they got back from Mr. Knox was urgent, but hardly supportive: a double-barrel castor-oil rant, scattered as can be and just as self-righteous as the first, against the “entitlement mentality”, the “world’s most overpaid, arrogant, ignorant, and laziest entitlement-minded ‘laborers'” and their “atrocities”, against “our new ‘messiah’, Pres-elect Obama”, against “the rest of the world” and their anti-capitalist bias, and pretty much everything in between.

Mr. Knox asserts that $GM has made its own grave, and I have seen nothing in my decades in this country to doubt that. It’s pretty obvious, and has been for a long while, that it’s a company that executes poorly at many levels, outgamed from time immemorial by its more business-savvy competition. As for its most imminent demise, there is somewhere a Madoff parallel to draw: only when the inflows slowed down did the veil come off the failure entirely.

The problem with Knox’s letter is equally grave, however, founded as it is on absolute certainty–his own–about a point of view he cannot articulate coherently–also his. Rather than convince anyone of anything, he spews an illogical and ill-reasoned set of misaligned beliefs that must add up to an argument because, well, he says they do. His sanctimonious tone (“Don’t even think about telling me I’m wrong. Don’t accuse me of not knowing of what I speak.”) cannot hide the fact that he cannot argue, because he cannot make a case. His writing cannot be wrong, because it demonstrates an incapacity to understand what it would take to be right. He hardly knows what he’s talking about, because he’s not talking about anything. Which is precisely why he asks his reader not to accuse him of not knowing what he’s talking about.

I do not dispute for a moment that laziness, sloth, and greed have run rampant in American industry and the American dream, but the deeper problem is that we’re a bunch of undereducated jackasses, and now that the inflow has slowed, we can’t hide it any more. Global Dominance and the Power of Success have kept us safe in our beliefs, and those beliefs are now failing right alongside the dominance and the success, just as we try to fall back on them as salve to the wounds we inflicted on ourselves by believing in our beliefs instead of fucking learning something.

So Mr. Knox jumps up and down on paper, rolls up Detroit, $GM, the Obama Jesus (who, apparently, was elected to perpetuate sloth’s atrocities), the bank bailout, productivity, free-market capitalism, parenting, and failed parenting in one happy glob of amalgamated rhetorical gibberish–please do read the whole thing, as an outstanding Goofus to useful writing’s Gallant–and closes by saying

Sorry – don’t cut my head off, I’m just the messenger sharing with you the “bad news”. I hope you take it to heart.

Oh, Mr. Knox, I have taken that bad news to heart. But you are mistaken: You are no mere messenger, unless that letter wrote itself. Because it is bad, bad news. $GM will be sold off for parts and change, while you will go on believing yourself to be the angel Gabriel a-trumpeting bedrock truth from on high, despite the fact that you offer us twelve hundred words of goop. No thinking, no clarity, no insight, just a bunch of words shuffled together from the loudmouth deck of punditry that now passes for thinking in this country, turning it up to 11 day after day. Cable news will be in touch.

We have a deep thinking problem, in both senses, far deeper than our economic woes. Sure, the economy collapsed, but as we seek to rebuild we are being outthought, and firing off idiotic rants all the while. We cannot take responsibility for it, because we cannot see it, because we cannot think outside our own beliefs. The first responsibility of an education is to understand the value of replacing belief with knowledge, prejudice with appreciation of complexity.

Business is neither an intellectual nor a rhetorical pursuit, of course. But we are not going to hack our way out of this crisis with a bunch of pieces of our minds. Especially angry, clumsy, lumpy, dribbling bits like this one, still circulating at least 6 months after it should have yellowed and flaked away in Gregory Knox’s outbox.

This post is perhaps a little outdated, but I write here to figure things out for myself, rather than to impress you, fictitious reader (FR) with my brilliance, and this is an unclosed loop that began with a post 10 days back, so now I’m gonna close it. First, a couple charts, courtesy of the fine folks at FreeStockCharts (and some very old-skool manipulation on Mr. U’s part, ah well…)

$SPY 2009 daily chartThis is a daily chart of the good ol’ $SPY for 2009. Hopefully it looks familiar enough to anyone reading this (and if you’re trading without charts, uh, why?), showing the infamous V. I add a single trendline to show you just how momentous this week’s action may have been to coming weeks’ action. A broken intermediate-term trendline, with a backtest point at a flat 5-day moving average, does not look easy for bulls.

As you can perhaps guess from the two arrows, I’m interested in a couple particular moments as they relate to government and its ability to create and destroy tape. The dates are February 10–the day Geithner gave his first stress test speech–and May 4, the date the stress test “results” were released.

Now, you may or may not remember the action immediately preceding February 10 (arrow #1), and what happened on that day. I remember it quite vividly, because February 5, 6, and 9 saw some real buying strength. On diminishing volume, granted, but I could “feel” the market wanting to rally. (And set myself up, painfully enough, accordingly, but that’s another story.) And then, on February 10, after some light morning selling, Geithner stepped up to the mic at 11 a.m., and literally as he opened his mouth, the market started to drop. Hard. And didn’t quit for another month, is the short version of the story.

Then, over the weekend of March 7-8, Citibank said they’d had a couple of good months, the market was even more deeply oversold, and we were off to the races, punctuated by a series of very cheery announcements from the financial industry, the second-derivative news, and the stress test progress, particularly some leaks (strategic or otherwise) in the final few days before May 4 (arrow #2), when the results were originally meant to appear, or May 7, when the results actually did come out. That week began with a fresh breakout, and ended with the rally high thus far, all, I would venture to say, stress-test related.

You can probably see where I’m going with this: I would venture to say that, in some form, the very same stress tests “caused” a fat drop and an equally sharp rip right back up. The government position, if you followed along, didn’t really change: They said the tests would be relatively low-stress, meant to reassure above all, and the results were apparently ugly but not too ugly, but regardless and in the meantime the market kep about what they meant. Somehow, against this policy, the market managed to convince itself 1) that banks would be nationalized when they failed their tests (with plenty of punditology backing them up in the 24/7 squawk boxes, and the government promising it wouldn’t happen) and 2) that the stress tests were a government sham, and a way of avoiding nationalization.  What I find fascinating is that policy got blamed for two contradictory versions of the story, while the market merely mean-reverted, basically ignoring version #2. To clarify: if the banks were to be nationalized, a plummet in share value makes sense, as shareholders feared being wiped out. But if the stress tests were too weak, and th$SPY 2009 daily chart, stress-free editione government was wallpapering over deep cracks in the system, the market should have dropped farther. In terms of sticking to message, the government has been far less schizophrenic than the market.

But I really wrote this to commit a TA cardinal sin, and offer you this second chart. It’s just like the first, but a stress-free edition–it jumps from Feb 10 to May 4. Strap on your tin-foil beanies, and note just how smoothly February 9 would lead us into May 4-8. If you omit the we-hate-Geithner’s-beady-eyed-voice day, you could draw a damn trendline right up it. And why is everyone now watching 875 so carefully? Government be damned: Eliminate the market schizophrenia of February, March, and April, and you have a range-bound market oscillating around it. (As an aside, I cannot imagine a clearer picture of just how important current support is than what this chart shows. Too bad it’s fabricated!)

I have one more trick up my sleeve. If you follow me on twitter–and, y’know, why wouldn’t you? I do–you have heard me grumble and moan over the lack of consolidation all the way up this “rally”, and the ripping behavior and leadership the financials have shown throughout. If I had no more than one sentence to deflate the rally excitement, that would be it: the financials are still dragging the market around by its peroxide-free roots, despite being deeply broken, and demonstrating a most convincing failure of leadership on every economic front possible.

$XLF 2009 daily chartYou could perhaps guess what the next trick is. At left, the same 2009 complete daily chart for $XLF. Note a similar break of the simple rally trendline the last couple days. Note the positions of the market at the stress-test inflection points of February 10 and May 4-8.

In keeping with the above summary of rally-hype deflation, I present you with a similarly mangled chart. The trendline has been broken and its backtesting is in line with a break, but note how far above their early-February level the financials still hang. Either February was too low already, or in May we’ve overshot–in other words, the financials market has spent much of this year overreacting to the$XLF 2009 daily chart stress-free stress tests, in both directions, relative to the S&P. I am not alone in saying we’re overdue for a correction; reasonably, the longer overdue the correction, the more severely participants might react to it, having lost the habit and/or settled into greed; the breaking of the trendline tells me it’s coming, and the big blank space above the February line says it’s got easy room to fall.

Not that this sort of nonsense technical analysis carries any real significance. My broader point is that any reaction to government “intervention” you might read in the tape is disortion, not commentary. We’ve had at least a two-phase reaction to essentially the same government activity. Plenty of other factors have played in the traffic as well, naturally, the most obvious of which is just good ol’ time. I believe Phase 3 is now underway. No doubt traders will yelp about the government having caused it, too.

Ahhh, a new month, spring is in the air, and time to digest a fresh media-master’s pronouncement that we have reached the start of a new bull market. Okay, “Sumner”, if that’s your real name (I’m kidding! it must be–a name only a mother could love), whatever you say! Granted, you’re a zillionaire media mogul and I’m Schmoey Smurf with a broken trading account full of fundamentally sound but technically inexcusable shorts, but spout baseless trash talk like that where gormless average-joe investors can hear you and I’ma call you out: You’re not fit to drink the pinot noir juice I’ll be wringing out of my hangover socks tomorrow morning. And tonight, I’ma toast that shit all night long.

I’ve been talking up media/market momentum since this blog began way back in April of ’09, but pundit/market momentum–or even crackpot dimestore analysis from an empire builder–is a whole other animal. Oh I beg your pardon “Sumner”, I shouldn’t paraphrase. Let’s hear it from straight from your horse’s ass’s mouth, shall we?

I think we’re in the beginning of a bull market. When a bull market begins, nine months later the economy turns around.

Oh, is that how it works? Mind if I paraphrase now? Thank you, sir. You are truly gracious.

A bull market is just around the corner, because I have visited January 2010 in my Viacom Timecopter, and January 2010 wanted me to tell you guys that it has an “economy”, and it’s all “fixed up”. So, go ahead and buy some stock today, so you don’t end up paying too much for it later! Might I suggest a generous helping of $CBS, due to report earnings May 7? Oh yeah, in case you were wondering, on my way back from January 2010 I stopped by May 7, and it turns out we had exactly the kind of quarter you have 9 months before the beginning of a bull market, which is very bullish for 9 months from now. January 2010 congratulated me on that quarter, in fact, before I even went there. The future is totally awesome, I think.

Oh, now I get it. Seriously though, his logic looks exactly like this rally’s logic: as long as people keep buying every dip, and prices keep going up, the economy is going to recover when we say it will. Never mind the reams of cogent analysis from crack econowatchers like Zero Hedge and Calculated Risk with a bunch of pesky “data” and “facts” and “charts”–the wind is at the back of the bulls, and that’s the right time to say that the wind will be at the back of the bulls.

If you recall, back in late February and early March when there was day after day of selling, lots of “how low can we go?” articles began popping up. Breaching 700 on the S&P was a huge deal, and the selling was so relentless it looked like it would never end. It ended. Now, after eight solid weeks up or nearly up, the punditedia has started putting out “maybe it’s the real-deal rally” pronouncements. They ride a trend right off the right side of the chart into spec-u-land.

Market trend is useful stuff–no one makes that case better than Howard Lindzon–but these are not rational markets, and their trends cannot be trusted. The brokenness can be very profitable or very destructive for trading, but don’t confuse one-way movement (January to early March short, March to now long) for proof of anything, unless it’s desperation: panic selling, panic buying, panic short-covering. What the bulls feel is a breeze–the longer-term wind is still at the back of chaos.

Remember that projections in the media–especially but not exclusively those of the soothsaying species punditrionus whiffleballia, and and those strewn like so many crumbs of wisdom from the top of the org chart–are sold before they can be proven, and will not be disproven before having been bought and forgotten. What does it cost Goodfellow Redstone to make such a pronouncement? Nothing but a couple blog rants from Schlumpy Smurf the Rally Skeptic. (Yeah, there’s likely to be a follow-up post down the line. Start counting the seconds.)

I shouldn’t pick on the guy; he has clearly jumped the marble. The problem is larger than what the batso kingpins have to say, at any rate. In light of the facts on the ground I linked to above, I find articles like this one from Jon Markman disturbing in a different way. He’s clearly a brighter guy with more knowledge of these things than I, and makes a very reasonable argument for what might keep pulling buyers in even after a sharp 30% run up, but I get worried when I read summary analysis like this:

Considering that at least half the economic cycle is about confidence, just shoring up the psyche is enough to get the ball rolling. Whether you call it green shoots or little green men, good stuff is happening out there in the real economy: Layoff announcements are receding, new unemployment claims are declining, U.S. business and consumer confidence is rising, Germany’s business activity is quickening, South Korea’s gross domestic product is picking up, U.S. existing- and new-house prices and sales are ticking up, Japanese exports are swinging higher, Taiwan’s leading index is higher, and container exports at the Long Beach, Calif., harbor are rising.

Notice the confident tone along with the confidence he’s seeing in the indicators. None of which are really specific, and several of which are actually clearly contradicted in the links above, but I digress. A lot of those assessments only stand if you compare them to a month or six ago. Of course, things have to stop getting worse before they get better, but there’s no guarantee they’re going to do that in snap-back fashion. He might just be saying there is some confidence that the bottom is in, but the writing sounds like the writer believes things are looking up. These two things are not synonymous. It is infinitely possible to crawl or bump along or oscillate around a bottom for a very long time. It is equally possible to start getting better and then get worse all over again.

The second-derivative misperception is very strong right now, and even a mastermind like Mr. Kass would now seem to agree with little ol’ Mr. U that less-bad news can’t prop this rally up forever, and will soon be as ignored as the regular-bad has been of late. Some of the data is still pretty terrifying; consider this adjusted GDP perspective courtesy of Barry Ritholtz. The pain has not ended, and if media makers great and small walk around pumping their ideas into the minds of people who don’t spend their days sitting around figuring out what to trade but do want to invest wisely for their retirement or their kids’ education or their Hobie Cat, and then the markets fail to confirm and those people have to sell the retirement, the kids, and the boat at a loss, the pain is actually prolonged. Much of which could be avoided if certain people would just suck on a Ricola, recount their zillions, and shut the hell up.

But enough thinking! Let’s see what else “Sumner” has to say.

The reason we have not gone to newspapers is because its a slow growth industry and I think they are dying. I’m not sure there will be newspapers in 10 years. I read newspapers every day. I even read Murdoch’s Wall Street Journal.

Uh-huh, uh-huh. The ol’ dying, slow-growing, disappearing, indispensable industry conundrum. Now that is a take on this rally I can get behind.

UPDATE: This Zero Hedge post should have been in here somewhere. Now it is.

Today’s outlier earnings reactions aside ($COF anyone?), I’d say that the failure over the last two days to push higher in the indices is another confirmation of the news tide shifting and the March rally’s petering out. Today looked like pitched battle in the charts, and also over on Stocktwits, where I kept the open stream up for much of the day (a habit I’ve been quitting as signal drops and noise rises), trying to measure a little trader sentiment. The number of times I saw back-to-back tweets of absolute conviction that it was time to buy the financials or time to sell them was a whipsaw of its own.

Earnings news is all over the map, of course, and the market’s volatile intraday moves are confirming this: analyst expectations plus beats and misses plus guidance plus one-time items and two-timing accounting plus recent price and volume action is a lot of vectors, and as the big players report and players large and small react, we get a choppy trader’s market, and the bulls and the bears get louder without being any more correct. Today’s 3:30 selloff was as hot and heavy as yesterday’s buy into the close.

Chris Nelder has a nice post up today in honor of earth day. He’s encouraged by all the new renewable energy projects underway here in the U.S. (as am I), but his focus then turns to the rally and the lockstep chart patterns of different sectors.  His reminder that financials are the real drivers of market action is timely too, and the real tell that this fat rally is not the rally. The financial sector is leading America and the world out of economic torpor? Uh, no. But day after day, it leads the market up, down, and all around.

Infrastructure and real estate would be important tells in a new bull market, of course, but the leading indicator of real building strength would be–or rather, will be, at some unspecified future date–technology. Innovation in tech is, hands down, America’s greatest manufacturing capacity these days. While tech stocks have of course been strong the last few weeks too (what hasn’t?), on any given day they continue to spank or tank with the banks, as if the two industries shared the same valuation. Total nonsense.

Were this a real bull market start, tech would stay strong in a selloff like we saw late this afternoon, and not just relatively strong. STRONG, like the industry actually is, even in recession. Sure, businesses and consumers are cutting back, but IT is buried deep in every business infrastructure and many lives now, with the internetz cranking away and kiddies young and old hitting the video-game crackpipe and smartphone telecom morphing from the new cool to the next must-have. That is demonstrable, logical strength–trend–that should shrug off confused price discovery if salad days were ahead.

The current profitability of Google or Apple or Research in Motion, considering the breadth of this recession, is very impressive (never mind Wall Street’s senseless expectations of endless growth and eternal youth), but these stocks have rallied off 2009 lows a lot less in percentage terms than, say, Citigroup, and remain well off their 52-week highs. If the bull market were back, the opposite would be true: tech would be so strong that crummy broken financial companies barely necessary to their doing business (no debt, huge cash) were dragged along for the ride.

Put simply, financials are the wrong leading index, but they’re our leading index at the moment. While they have surged off severely distressed lows and pushed the markets up, the state of finance here and abroad continues to make sustainable market growth impossible. The bulls may not want to see this (that’s a Hussman link, a must-read), but a few months’ earnings as tweaked by a press release notwithstanding, we remain one or two nasty news stories away from this fraudulent, grabby, and broken sector’s dragging our undervalued technological prowess–and the rest of the market–down all over again.

I will admit, these days, to enjoying bad news about the economy. Not because I am a “pessimist”, whatever that is, but because it feels less dishonest. In my own little Unexpectedly bubble, I’m not seeing the recession sink in for most people, and whatever else you might say about it, this is the kind of recession that ought to go to the bone. Not that everyone’s not talking about it around me; everyone is. Talk is cheap (though more expensive than many stocks these days).

In short, I am rooting for the recession-is-good-for-America argument to take hold, because as later posts will elaborate, America has needed an overhaul since about 1983. (For the record, no, I haven’t read that Time article I link to. Time has sucked since time immemorial. I link to it as an easy shorthand, so that you my FR do not think I’m claiming to invent the idea.)

So yeah, anyway, bad news. Here’s some more, from esteemed prediction ‘n’ analysis master John Mauldin: Is That Recovery We See? (Spoiler short answer: Uh-uh.) He makes (or, in many cases, merely repeats) numerous cogent arguments for this rally being a matter of scarce negative earnings surprises, failure of analyst estimates, shadow foreclosed houses, underingested commercial real estate implosion, recovery speed of corporate earnings, etc. Good stuff, go read it and play with the charts.

But I mention this analysis, number 31,427 I’ve read in the last six months telling us exactly what’s going on (shouldn’t it only take one? We could, y’know, send it around, repeatedly even. The internets are good for that) also because there is something in it that is a shame, and helps me launch a theme I will return to often in this “blog”:

Further, the Democratic Congress and the Obama administration are going to enact the largest tax increase in history in 2010, just as the economy is barely recovering. The Bush tax cuts go away, because the Republicans could not make them permanent when they had the chance. We are going to pay for that with a likely dip back into a recession in 2010, or at the very least a prolonged weak economy.

This statement is false, even just by logical standards. No taxes are being “increased”; it is merely the largest tax cut in history that is being allowed to expire. Moreover, there is no indication that keeping the rich from running away with the country (cf. all of recent American history) will cause or prolong economic hardship. In 2009, one could very easily make the case that allowing the rich to run away with the country has caused a lot of economic hardship, such as, for instance, the entire global meltdown currently underway. The average American will be unaffected by this tax cut expiry, and if the average American isn’t driving the economy up by next year, any attempt to frame what is going on as recovery will be laughable.

But the larger point here is that the statement has nothing to do with the rest of the newsletter. It’s two-cent political hectoring dropped into a bunch of decent, reasonable economic and financial analysis. Why? Because, apparently, Mr. Mauldin is so good at economic and financial analysis that he can accurately characterize the direction of the political winds, too. (And more power to him. It’s his damn newsletter, after all.)

This is not at all uncommon among the financially savvy; their ability to read markets well in a relatively free-market country, they believe, qualifies them to read all sorts of other things having nothing to do with markets accurately too. America is, thank our lucky stars, much more than its markets. Market-obsessed, certainly, but much, much more, and that moreness moves according to many laws unknown to marketeers. This is why, as a gross generalization of an example, finance types have such crap taste in popular music, in a country that is still a drivin force in popular music around the world. (Seriously, investigate for yourself, and if you find a trader who doesn’t love Skynyrd and/or Jack Johnson, report back.)

It is my great hope that the continued implosion of these markets will finally allow the much, much more to gain a foothold, an audience, and, ultimately, control, of which more in coming weeks. As for the accuracy of Mr. Mauldin’s extra-financial pronouncements, we’ll start keeping score on him right now. His current score is zero.