The Bottom is In

Yep, it is in. Not today, but the low's give our take 100-200 points on the Dow. Don't laugh - 100-200 isn't an equivocation its just actually a fairly tight range given the Dow has been moving 200-600 points per day regularly for the past 2 months.

So, every time anyone makes a bold prediction like this, I always instantly want to know why so I can mentally lambast them for putting so much hubris on the line. Since I'm being so bold - I'll indulge all those like myself.

For months we've heard of pundits and talking heads stating that this could be the worst recession since the Great Depression. I promise you that you can find an almost endless list of "worst since" statistics that eclipse even the capabilities of baseball commentators statistics spewing while filling dead air-time between pitches. Only someone living under a rock hasn't heard of the trouble we're in and everyone who cares has heard enough bad news and seen enough retirement exploding statement declines to know and act on the worst case. I won't even bore you with stats on mutual fund redemptions blah blah blah...just watch the television.

The fact that today the market rallied in spite of a massive suprise in the number of job losses (and not the good suprise) as well as a revision of the prior months losses to the upside signals that the psychology of the investment community has moved from shock to recovery. They know its going to be bad, they're ready for more of it - and they've ACCEPTED it. Think I'm crazy - ask yourself "what other choice do they have, but opportunism?" When people start to think like this - they've reconciled their losses and have moved to the phase of "how do I get back on track".

I blame it on the unconditional eventual optimism of humanity. I'm not being teary-eyed and optimistic - its hard-wired and predictable. Once you stare into the abyss and see the potential for doom, you panic, and then if it isn't the abyss and you're still alive - you move to survival mode - "what do I do now", and start planning for the future - one day, then one week and so on. Don't believe me then answer this - If you thought the future was doomsday - why are you going to work on monday? Because you're unconditionally optimistic, no matter how cautiously. If the present is tough you think of the future while you struggle to get there. This is "expectation" and its the basis for the stock market - your expectation for the future has to be brighter strictly from psychology - how else would 6 in 10 people think they'll be a millionaire someday even though only 2 will actually become a millionaire? Bet on this drive - its simple, non-specific, but its buried deep in human drive and it is the real engine of the U.S. economy and in many places the world economy.

So, people have seen losses, they've suffered the abyss. They will be tested again, but we've already been tested enough that some people have come to the realization that some sort of world will go on and they're figuring out how to benefit from it. That is why the bottom has been reached, we may scrape along the bottom, perhaps drop below for a brief few moments (a day or two), but make no mistake - it is in.