Sunday, May 10, 2009
Writing for the Telegraph, a publication that has extensive coverage of the MP's "expenses" row and yet one more embarrassing story about Goldfinger Gordon Brown's 1999 gold sales, Ambrose Evans-Pritchard comments on our "delicious spring", casting doubt on the sustainability of the current stock market rally in this report.
Enjoy the rally while it lasts - but expect to take a sucker punchThere's nothing quiet about the current affair.
Bear market rallies can be explosive. Japan had four violent spikes during its Lost Decade (33pc, 55pc, 44pc, and 79pc). Wall Street had seven during the Great Depression, lasting 40 days on average. The spring of 1931 was a corker.
James Montier at Société Générale said that even hard-bitten bears are starting to throw in the towel, suspecting that we really are on the cusp of new boom. That is a tell-tale sign.
"Prolonged suckers' rallies tend to be especially vicious as they force everyone back into the market before cruelly dashing them on the rocks of despair yet again," he said. Genuine bottoms tend to be "quiet affairs", carved slowly in a fog of investor gloom.
The entire piece is worth a look, particularly the parts about the Economic Cycle Research Institute being all wet in their prediction that the US recession will be over by summer, drinking hemlock, and, of course, deflation.
This week's cartoon from The Economist: