Merry Christmas

Two weeks ago the stock market did something notable-- it rallied on extremely bad news. Two Mondays ago the retail figures were reported, they were horrible, and the stock market rallied. Then on Friday of the same week, the unemployment numbers came out, the worst in 35 years, and the market rallied 250 points. This is important, because it certainly looked like the market was "peeking around the corner" and trying to anticipate the state of the economy in mid/late 2009.

For the last 3 months, the stock market has varied between being priced for Depression (value stocks) and a deep Recession (growth stocks). A little perspective is in order here. Just as the peak of the 1999/2000 tech bubble looked like it was "different this time" in an optimistic sense, this trough of 2008 looked like it was "different this time" in a pessimistic sense. The only thing we can point to is that in both instances, the extreme view over time is not likely to be warranted; in other words, when the markets price assets for the extreme case, that is your point of exit or entry to either maximize your selling prices or minimze your buying prices. The truth is that a "normal" market is somewhere between the extremes.

While it doesn't look like we're going to get a Santa Claus rally in the stock market, let us remember that the purpose of all of our getting is understanding. A year like 2008 makes us reflect on those things which are truly important-- our friends, our families, our children, our health. Merry Christmas.