Some perspective on the headlines

(29 Jan) The markets got hit with a triple whammy on Thursday that erased the gains made just the day before. Let's look behind the curtain to see what we can see.

The mercs

A shorthand term for mercenaries, I'm referring here to the traders and portfolio managers sitting around the world and seeing the US market up four days in a row for the first time in quite a bit. Recalling that just a year ago right about now was the start of the falling trades that everyone wants to forget, these fine people said, more or less, I believe I'm going to extract some of the profits in these issues, I'd like to book a few profits in the early going this year. And so, they did. The markets dropped as there was a greater supply of orders for sale than there was of those to buy. This process, known as profit-taking, occurs with great regularity in the normal course of market events.

The earnings

Like the old Clint Eastwood movie, we could title these "the good, the bad and the ugly." Most of them are ugly, due to the bad last quarter in 2008. Ugly means not as bad as we thought -but not good. Also, please understand that the companies are not going to overstate any potential good in an environment like this - just like when it's all good, they tend not to play up any potentially bad stuff. Kind of hedging their bets.

The good - and there have been a few of those - are companies reporting numbers that were really above and beyond. Their prices really get a boost as they tend to stand out in a crowd right now.

Then there's the bad. It's not as if it wasn't a kind of forgone conclusion. It's just that human nature still doesn't accept it as real until it hits the print. Whether it's short or long term impactful has no bearing on anything - right now, it's just bad.

We'll be having more earnings releases for a couple weeks yet.

The economy

Oh, the media love these.

The unemployment hitting "record highs." Not exactly. It's the highest since 1983, when you adjust for the working population. 1983 just happened to be the tail end of a really tough recession that makes this one look like a cake walk with much higher interest, inflation and tax rates -as well as higher unemployment. From there, we went into 20 years of almost uninterrupted positive markets. Going to do that again? Not the foggiest - ask me in 20. I do submit that it reinforces the fact we're at or within micro-millimeters of the low, however.

Worst December since the dawn of time for the sale of new homes. Three things got left out of that blast. First, it was just a little nippy and flaky across the country pretty much the whole month. Next, and more to the point, most potential buyers were staying put - and still are -because of the new administration.

There have been rumors for some time that there will be very low - say 4% - mortgage rates and maybe even tax credits for new home buyers. Nobody's jumping until that rumor is substantiated, killed or massaged.

Finally, over the whole year, there was - in fact - a drop of 27% in the inventory of new homes for sale. The ones remaining are either already built or empty lots.

Summary

There is nothing in any of this news that gives me room for concern that we're not in a position to move broadly higher from here.

I'm not certain when. I am, however, certain that...