It’s interesting these days how economist and fund managers
are in consensus that the "worst of the recession is over."

From a contraian perspective this is sending warning signals to me. Yesterday
June 25, despite poor jobless claims numbers markets rallied in the US. This type
of behavior was seen in the first two quarters of 09 where you have poor
fundamentals being reported with positive reaction in the markets.


This either means that the markets are focusing on the
overall economic/financial health (the positive consensus seen from economist
and fund managers), or the same relationship that we saw in the first two
quarters 09 (poor fundamentals => positive reaction) is still strong,
whatever the driving force may be.


This positive move in equities/markets is in the context of a
negative FOMC and poor Jobless claims. If one where in the camp of believing
job markets need to improve before recovery, then this is all bearish news, as
market sentiment may eventually converge to market fundamentals towards the end
of 09 or into 2010. Of course this scenario won’t play out if economic
fundamentals (eg job markets, GDP, etc…) improve significantly over the next
two quarters or so.


Some would say that we can spend our way out of this
recession (i.e. the media is spinning off how government stimulus = better
economic conditions as seen by recent consumer reports). To be honest, I just
see this as the media’s and government’s way of trying to rebuild faith in the
system, and it does not reflect true fundamental health.


Also, I would like to point out that after one of the
longest credit expansions in history, low income, and lower middle class, and
even mid to upper middle class consumers are still being stretched. I haven’t
checked on savings data or debt data, but I’m sure the magic fiscal stimulus
wand couldn’t wipe out all that debt and create savings within a few quarters.


The point being is that the worst is still not over, and I
still remain long term bear.


As for the short term, I still think this bull market rally
has some steam to it…

http://www.bloomberg.com/apps/news?pid=20601109&sid=aome1_t5Z5y8

WoW, after just posting that I found savings data right on bloombergs homepage. If "fundamental behavior" has really changed, resulting implications can be really huge. So its quite possible if savings rates can be maintained at this level long term perspectives could be better however, the risk can be that such a behavior pattern holds hinges on policy maker's ability to change legistlation in order to make sure the system doesnt return back to the type of credit cycle we saw through the 2000's.

Though, overall im still maintain on long term bear and short term bull...