The Street is drunk on its own Kool Aid: Less bad was good last week… that is, if you’re of the mindset that a half-million people losing their job in April is good.
What has been extremely frustrating over the current run in equities, and therefore, energy, has been the perverted notion that market stabilization is somehow synonymous with demand, i.e. the so called “V shape” recovery.
We enumerated our view in last Thursday’s issue of The Schork Report. The Street is drunk on its own Kool Aid and now has convinced itself the recession is over… despite the fact the White House’s chief economist does not expect positive job growth until 2010.
Two months ago traders were buying equities because they wanted to “participate” in the equities rally before the bear market resumed. In other words, they did not believe the fundamentals justified buying, but the market was rising so they hopped onto the bandwagon for the ride. Now that the market has risen (the S&P is up 40% from its February low) these same traders are now coming into the market with 20/20 hindsight and spinning a dubious fundamental case, hence the less bad is good mantra that all the fashionable market commentators have been parroting for the last two months.
What started out as a bear market rally in equities back in March has now morphed into a full fledged rally. Skeptical money mangers, disgruntled and dismayed that they missed this run-up are now reluctantly piling sidelined dollars into the market so that they too can “participate”. The bullish view on equities has provided a significant uplift to energies, WTI in particular, as some of the money pouring into the market is finding its way to the NYMEX. As such, the NYMEX and the ICE have a vested interest in rising oil prices. Therefore, you have to follow the money.