The gloomiest newspaper

The mainstream financial media is, if anything, perplexing. During Larry Kudlow's show on CNBC last Wednesday where Barry Ritholtz was "thrown to the bulls", Larry had the following to say about the Wall Street Journal:

...on the front page of the Wall Street Journal which has been practically the gloomiest newspaper - not the editorial page, but the news part...

Another memory from last week came trickling back upon watching the CNBC video, a video clip that stands as a stunning testament to just how bullish this one part of the mainstream financial media has been and will probably always be.

During our chat last week, Barry commented something to the effect of:

Remember that CNBC is not business news, it's entertainment.

The subject of market sentiment, CNBC, and the Wall Street Journal made something of a nexus this morning after sitting through the Kudlow segment following the reading of the Money & Investing section of the WSJ.

Two stories (both behind the subscription wall) stand out:

This Stock-Market Rally Is a Keeper ... or a Tease
By E.S. BROWNING
May 19, 2008; Page C1
...
People like Eric Bjorgen of Leuthold Group, a money-management and research firm in Minneapolis, are wondering whether this rally is something they can invest in for the medium term or just a bear-market bounce that will soon fade.

To figure that out, Mr. Bjorgen looked at 10 past stock recoveries. He wanted to know what kinds of stocks usually are strong when the market recovers from serious trouble, and whether those groups are leading today. He discovered some anomalies.

Over the past 60 years, market leaders at the start of lasting recoveries often were stocks tied to consumer spending: hotels, resorts, cruise lines, general-merchandise stores, banks, home builders. Investors were betting on a rebound in consumer spending.

This time, only a handful of those groups are leaders, including consumer-finance companies, home-furnishing stores and Internet retailers. More of the leaders are heavy-industry groups that usually rally late in bull markets, notably those tied to coal, steel, fertilizer, oil and industrial gases.

Mr. Bjorgen says he fears that investors are looking backward. They are showing confidence in the areas that were strong late in the past bull market because of the robust global economy.

And in the Ahead of the Tape column:

Stalwart P/E Shows Stocks Getting Pricey
May 19, 2008; Page C1
By MARK GONGLOFF

Stocks have had a nice run these past couple of months. The downside: They may no longer be a bargain.
...
One view of P/E offers a warm blanket to the bulls: The Standard & Poor's 500-stock index trades at 15 times forecast operating earnings this calendar year. But that's not much of a deal when compared with the 60-year average of about 12, according to various estimates.

And earnings forecasts for the remaining months of this year are probably optimistic, as they assume a quick and roaring recovery amid an economy barely scraping by. Lower those forecasts, and the forward P/E ratio rises.

Other takes on P/E lead to a still-more-bearish conclusion. When measured against the past 12 months' reported earnings, the S&P 500's P/E ratio jumps to about 21, above its 60-year average of roughly 16.

Entertainment versus solid financial reporting - perma-bulls versus gloomy pragmatism - an interesting contrast.