Last week’s rally was one of the more ridiculous I’ve ever seen in 15 years of market experience. Shallow, narrow, childishly simple and led by a rag tag band of piece-of-shit loser stocks and risk-on benchwarmers, nothing about it made me feel that anything had changed.
Charles Biderman (TrimTabs) agrees, he came out swinging on the 2%-Up Day last week, I thought his commentary worth passing on:
…all that cozy chatter, following a two-week stock sell-off, apparently was enough to generate a 2% gain today in the S&P 500. Obviously the short term greedy rushed back into stocks not wanting to miss this big rally. They were cheered on by a lot of so-called market pundits on TV whose ratings rally when the market does. One network nitwit even said the market could have only have gone up the way it did today because someone somewhere knows that there already is a deal that will save the world.
What nonsense. Whether or not there is a deal, all I see are a lot of tax hikes. At best, taxes will go up by nearly $200 billion next year and at worst probably double that. Since after tax income is growing at $200 billion annually, a best-case scenario is no growth in US after tax income. At worst, and the most likely outcome, is for a drop in after tax income.
And remember GDP is a garbage number that measures maybe 60% of the US economy. Therefore, my definition of a recession is when after tax income drops year over year for at least three months or more. And that is what I see happening next year regardless of whether there is a deal on the fiscal cliff.