Stocks Begin 2009 Optimistically Confused

Well here we are in a new year, 2009, and as if to signal that all will be well, the stock market spent Friday rising. Along with that rise we get the spontaneously materializing commentary that things are not so bad, that a corner has been turned, a low point reached.

The upward movement was largely on low volume, so it remains to be seen if the hordes and huns returning to work on Monday will follow the lead of Friday's euphoria by ignoring all relevant economic data. At year's start, we should always expect a bit of portfolio management, with those funds who are expected to buy, or adjust portfolios, to do just that. But we should also expect a bit of discrection.

That certainly was not reflected in the market's rise at the same time that the Institute for Supply Management was telling us that their index fell to 32.4, a 28 year low, reflecting slow going for manufacturing.

"The decline covers the full breadth of manufacturing industries, as none of the
industries in the sector report growth at this time," said Norbert Ore, chairman
of the Institute for Supply Management. U.S. stocks, meanwhile, climbed in
2009's first day of trading, with the Dow Jones Industrial Average up triple
digits. See full story. The institute said that new orders now have contracted
for 13 consecutive months, and are at the lowest level on record going back to
January 1948. Manufacturing payrolls also shrank as the employment index fell to
29.9% from November's 34.2%.

(Marketwatch)

This is not always a reality based market, given that the participants themselves are not necessarily reality based. We affirm our one true fact to carry you forward through the year: the markets are not always rational or efficient. They are merely a reflection of the people, who themselves can be motivated by fear, greed, stupidity, or lack of due diligence. So when all are saying "peace, peace" then be prepared for sudden destruction. Likewise when all have concluded that they have pinpointed the time and place for disaster, be wary of the profits of doom.