Yet another "Is the market Rally Real" Article

Yet another day, Yet another "Is the market Rally Real" Article

By now, most investors are tired the question "Is this rally real?" We've already explored the topic on this blog. But here is one more article in WSJ about the market rally.

After a rough start to the year, the Dow Jones Industrial Average has surged close to 11% since March 10. It is down just 8.3% from October's record, a lot stronger than many expected.

It's alot stronger than I certainly expected.

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.

Yet another proof we live in a bizzaro-world. You know more writedowns is good because we are at (Yet another) bottom in writedowns; Oil prices up, good for energy stocks and thus good for market; Oil prices go down - good for the market because it helps consumers and so on.

"This kind of work suggests that it is not a bull market, but really a bear-market rally," Mr. Bjorgen says.

.....

Hopes are spreading among economists, too, encouraged by retail sales that weren't as bad as expected and by economic-growth and employment numbers suggesting that the economy might be avoiding recession. But there also are doubters here, and they focus on the same area as Mr. Bjorgen: the consumer.

This is my one question to goldilocks. Consumers are 70% of the economy and they are spent. How do you have a recovery without them?

So far, consumers have been more resilient than expected, and Mr. Pandl notes that, in recent years, it has always been an error to predict the American consumer's demise.

Still, he points to Fed data suggesting that consumers are sustaining their spending by shifting more debt to credit cards because new mortgages and home-equity loans have become hard to get. He believes there is a limit to how long consumers can put off the day of reckoning.

"Ultimately, there is only so much you can borrow" on credit cards, he says.

...

Mr. Pandl and his Lehman colleagues believe that slumping consumers will send the economy into a double dip, with a tax-rebate-fueled recovery this summer and a sag starting later this year and running well into 2009.

We'll soon find out whether this is a real rally or not.

http://online.wsj.com/article/SB121114495689301827.html?mod=todays_us_money_and_investing