Cross Walk

After two days in the desert sun
My skin began to turn red
After three days in the desert fun
I was looking at a river bed
--America

The Dow's lift thru 10,000 yesterday had the headliners out in force. Was amused to see FBN pushed aside Dave Ramsey last nite in lieu of a special Dow 10,000 show.

I can construct various scenarios that 'explain' the big market lift off the March lows.

1) We were due. Markets don't move in a straight line. Instead, prices cycle between periods of optimism and pessimism--even when trending up or down. After one of the most dramatic waterfall collapses in market history, it stood to reason that we'd see an equally historic rally off the lows at some point. Should this scenario prove 'correct,' then once the oversold pressure is adequately relieved, then the primary trend lower, driven by the deflationary phase of the credit cycle, will reexert itself.

2) It's all about inflation. Market are levitating higher on an ocean of liquidity created by central bank policy and government intervention. Following this line of thinking, historic levels of intervention may lead to historic market price increases. Should this scenario prove 'correct,' then prices may continue higher. In fact, all this new money and credit may help us blow another bubble. Indeed, some smart folks I know are wondering where that next bubble might be, and how to participate as it expands.

3) The fundies are all good. Bad credit and bad actors have been wrung out of the system and the forward fundamentals are looking up. There's a new world order that promises smarter decision-making and innovation that will raise standards of living around the globe. Should this scenario prove 'correct,' then prices will move to levels never before seen--based on increased returns on productive capital.

Before 'choosing' a particular scenario of blend of scenarios as a basis for investment decisions, the prudent individual should seek answers to two questions. First, what precisely was it that drove stock prices lower? Second, what has transpired to eliminate those causes in order to prevent recurrence?

position in SPX