Green Shoots All Shot

The US stock market keeps roaring ahead. Good times can't be far behind, right?

Hmmm... some ugly facts keep disturbing the rosy picture. Here's the number of bank failures in the US:


And while your local bank is going under, there are far fewer trucks on the road:


So with that, why is the stock market booming? I dunno. The only thing that makes sense to me is that the fear of Oct 2008 to Mar 2009 of The Great Depression 2 has been replaced by a "thank goodness, it will only be a Great Recession". So prices have bounced back.

But when I look at this graph, I think they have bounced way too far back:


The above grahic makes the Great Depression look benign. So... if earnings are that bad, why is the stock market up? The talking heads of Wall Street are saying that there have been "earnings surprises", i.e. more profits than expected. But that's an easy game to fix. You set your expectations really, really low, and anything will be an "upside surprise".

And here is a terrifying quote:

“National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”

-Mark M Hanson

So, I'm back to my original question: why is the stock market booming?

My guess is that fear & greed are running rampant again, fed by Wall Street manipulation. In other words, we are getting back to "normal".

Graphs from Barry Ritholtz's The Big Picture web site.

Update 2009jul28: There is a nice article on the UK Telegraph entitled "Stock markets are rising even as the economy bombs - what's going on?" that walks through this odd Wall Street rally given the real underlying state of the economy.