Thursday, April 9, 2009

If it walks like a duck......

As the market rises on a wave of feel good pronouncements, something just doesn't quite feel right. I've been expecting a bottoming process for a couple months, but this? Is it because of the large amounts of cash in portfolios? Spring weather in the air? It sure can't be because a bank ceo declares they are making lots of money (but offers very little in the way of proof), can it?

Mark to market accounting rules have been ...well have been, not really anything, but lots of news is announcing that nasty mean spirited accounting standard gone, along with the clarity it is meant to provide.

Wells Fargo has provided a much lower level of loan loss provision than might be expected since the underlying collateral of loans continues to decay. Residential and commercial markets are by no means buoyant, and that is after all the underlying value of the loans.

This delightful market rally is on volume of about 35% less than the 65 Day average volume. Big rally, low volume, holiday weekend with shorts covering financial stocks in advance. Turning this ship is going to take more than a bear market rally.

Having said that, maybe that is the classic climbing on a wall of worry.

John Barnyak