What is "Normal"?

The market has been ripping. So why are Wall Street professionals unhappy? Why is the misery factor as high as it was last November and this March? Irrationality. The market has NOT been behaving properly and this has killed another round of professionals just in Q109.

Without getting into specifics, winners last year--are losing BIG this year. Fundamentals are only slowing at a slower pace....not getting better. Shorts who know this have been taken out on stretchers because as fundamentals continue to weaken, stocks have ripped higher. This is the second derivative call and play that many spoke about early in January. There is however, a major flaw to this in terms of a longer market rally.....what if what we have see is it...or things only get marginally better....and what if they get marginally better for a long time?

So as every market is up big from March, the next question must be....what is the new normal? During Q1 earnings season, we heard the same general messages:

Profits better than expected on weaker revenue lines but strong cost controls have driven bottom line numbers higher than exceptionally depressed expectations. Moreover, companies have trimmed head count and utilization rates in such dramatic ways that any uptick in a restocking will send many back to work, and turn on silent production lines. The question is...is this sustainable?

My suspicion is no, unfortunately. Consumers are still strapped and given where they are now...they still are in no mood to spend. Will seeing their 401k's go up in Q1 help them feel better? Absolutely. However the rate of spending that is needed to drive the economy higher is a friggin pipe dream.

Housing prices have still not bottomed. What we see being sold are mostly homes in foreclosure. Not real sales. Real sales are happening but at a slow pace. Moreover, when they do occur, bids are well below asking prices. Bids are being hit...or a period of negotiation occurs that favors the buyers--due to the significant amount of inventory on the market.

This drives the ask down across the neighborhood and community. As these prices continue to come down...they weigh on pricing of homes across the community. A $1,000,000 home that sells for $875,000 or $925,ooo will force the homes in the $9ook and $800k price ranges to fall...

This will continue to occur and it will happen across the country for several years to come. As it does, consumers will again have LESS and will be forced to spend less and save more. This combination will not permit global economies to levels we saw in 2007 for several more years.

You see...we will NOT return to normalized numbers...not sales or earnings and this will keep a lid on the equity markets for a LONG ASS TIME.

Feel better? Don't shoot the messenger.

--The Angry Trader