No Bites

Over the weekend I deliberately did a couple of posts that are pressure points for some folks I know - at least from time-to-time - read my blog. Now I am not saying I made up what I was saying or did not believe in it, as I would not do that here, but I may have been a bit more over the top just to push my friends' buttons. Yet so far, not a rise out of them, at least in terms of comments. Perhaps they are not reading my blabber after all.

HEAD FAKE

Let me start by noting that in some way most of the functionality of this blog has shut itself down - or perhaps I did without knowing. I cannot bold, attach stuff or do any of the regular functions. With that warning, let me address the title of this piece that I had to capitalize as I could not bold it.

The markets, coming off a three day weekend in the U.S., seeing good market climb over seas, were off to the races this morning. I saw the Nasdaq up over 2% at one point and - then - the bottom fell out. We still ended up with a late day rally, but the air left that balloon very quickly. So what is up with this?

Unlike the folks at Bloomberg who seem willing to surmise every hour or so on why the market is reacting as it is, I will resist the temptation to be that precise. I do have a couple of more macro observations to note. First, after a couple of weeks, indeed months, of drops, there is certainly a load of money on the side-lines waiting for a bottom to set in, so a bounce off a nice weekend with no terrible news was not too surprising - especially with over-seas markets leading the climb. Yet there also was no real positive news and what little there was was not to inspiring. So we had a hectic day yet closed up with a nice bounce at the end of the day.

Now I do not see this having legs despite the market bounce at the end. The drivers of the drop this past month plus are still there. You know them: stimulus ending this year in the U.S. and elsewhere, the EU and U.S. perhaps doing some fiscal tightening, EU debt issues and sovereign downgrades in focus, China's expansion cooling considerably (as it needs to), job creation not even close to keeping us even, real estate (commercial and residential) still sucking wind despite low rates, the oil spill in the Gulf dampening spriits and imposing financially on expectations on various fronts . . . and the list goes on and on. Botttom line, in my macro-opinion, the markets out paced the recovery and are now returning to Earth. So the big question, have they landed yet?

Honestly, economists from what I can tell vastly over estimated corporate profits, growth and the like for the last half of 2010 and 2011, so if I am right, stock appreciation based on such growth is toast. The market has corrected a good bit but I suspect has just a bit to go. It will take something drastic, in my opinion, to take us down or up seriously from here, but I am just guessing here. No one knows. At the end of the day, what I do believe is that the market is correcting to normal.

Expectations of economic growth in this country or others are over-blown. They are based on income predictions that are not realistic. We are in the process of reaching the mean, as in what economic activity in this world can support now and in the long term. I thihk for the stock market the norm is still a bit lower as the market still has built in some growth above what I expect. By year end I expect markets to be down another 10-15%. We will see. This is just my best guestimate and there are plenty of folks out there much smarter than me.

Disclosures: Well I have equity positions and short positions to hedge, so I am all over the board.