Easy Money Made You Lazy

We've had an easy market for 9 months. You didn't have to think to win. All you needed was a little money and some risk appetite. Everything floated up and up. You just had to buy something. You nibbled and it paid off. You bought more and it rewarded you more. Then you got used to thinking that you couldn't lose.

Well, think again. I've been reiterating the disparity between the stock market and the real economy. We know that stocks price in the economy 3-6 months ahead of time. The rally 9 months ago made sense early on with all the stimulus talks and monetary easing. Then it made less sense during the summer run-up. Now, we're faced with stocks that have appreciated 1-4 fold and the real economy is not any better off than it was at the beginning of the summer. What gives?

Blame will go around the table more than once. There's plenty of it. But, I think it begins with you, the individual. You suffered a horrible 2008, arguably the worst of this generation. You were so down that you were willing to stick with anything that provided a glimpse of hope. After losing so much getting a little back was heaven. And when that hope grew a bit brighter you latched on for good, no matter what.

All the while, it didn't matter that jobs were being lost. It didn't matter that people were going months and even over a year without incomes. You bought a new car just because the government paid for some of it even though you couldn't really afford it. And, you bought a new house, also with the government's aid, thinking it was a good time to buy even though renting provided more value. You may have upped your savings but it didn't hit you that you're debt load was overwhelming. Worst, you thought you'd win against Mr. Market so you plopped some dough on the line and bought Apple, Google, Amazon. Well, let me tell you something...so did everyone else. It's payback time and you're not ready for it.

Making My List

We know Christmas is right around the corner as the year winds down into the winter months. It certainly feels cold outside already. And, I started making my list last week. No, not a Christmas present list but a 2010 stock list of what I would own if the market allows me. I will reveal some picks over the next few weeks.

No doubt the market has been riding high. Dow 10,000 is a reality. What continues to bother me is that Wall St is celebrating by drinking dollars but Main St is held hostage to unemployment, lower wages, lower asset values. Main St is not healthy but Wall St continues to price in what she expects to be a much healthier economy.

I see no signs of that yet. Companies are still routinely missing top line numbers. Unemployment is still increasing albeit it at a decreasing rate. Banks are still not lending despite historically low rates. Existing banks still wrestle with ugly balance sheets that are riddled with credit issues that only they know of, if they know. The FDIC continues its torrid pace of taking over troubled banks. The list can go on.

Some market strategists have indicated that we're not going to see another big correction this year. The strongest point pronounced is that since the market has run so much this year that those fund managers underperforming will be buying any and all "intraday" dips. Of course, retail traders will in exchange see what they perceive as a strong market. Same old story. Good luck.