Behind the Money

BEHIND THE MONEY: Market 'Hangover' On The Way?


Warner Brothers' 'The Hangover' is opening this weekend and if the trailers featuring Mike Tyson punching the Zach Galifianakis character in the face are any indication, it is likely to be a big hit.

The market has been partying hard too the last three months, with traders bidding up all the sectors that are poised to benefit if the recession does end. Consumer discretionary, industrial and raw materials shares are all up more than 40 percent. The laggards foretell the story of a coming recovery as well, with recession favorites staples and health care trailing.The better-than-expected jobs report today seems to confirm a recovery is at hand.

But instead of Mike Tyson, will traders wake up one morning and find Ben Bernanke punching them in the face? That's the worry among some of the Fast Money gang on our morning call. This three-month monster comeback in stocks is being driven by the easy money provided by the Federal Reserve Chief, they say. At some point, especially now with signs of a recovery here, Bernanke will need to take the punch bowl away. If he doesn't do this sooner, rather than later, he could risk a disastrous hyperinflation scenario.

When Bernanke does signal this move "all asset classes are going to pullback," said Joe Terranova, chief alternatives strategist at Phoenix Investment Partners and a FM trader. The negative reversal in stocks this morning may be a sign of what's to come, Terranova said.

And perhaps this rally was purely a bet on reflation from the Fed and not a sign of a sweeping economic recovery.

"While many view the decelerating job losses as signaling the end of the recession, they appear to me as signaling the end of the panic period of the credit crisis," wrote Fusion IQ's Barry Ritholtz, on his this morning. "We are now in an ordinary, as opposed to historic, recession."

We may get our answer on June 24, when Bernanke and the Fed signal their future intentions at the end of a two-day meeting. Any sign Bernanke is pulling back on the reins could spark a correction in stocks.

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