The Fundamentals Stink: Buy Stocks

And speaking of the improving quality of personal income data, there is now greater growth in above-average wages after four years of below-average wage expansion. Taken in isolation, this appears to be a positive development. But...

Following a mild recession and a horrific market crash, many people have been taking lower-paying jobs with fewer benefits. A combination of postbubble economics, globalization and outsourcing are the primary reasons. (The full examination is another column in itself.) After a four-year hiring spree, these lower-paying industries have most of the employees they need. It's somewhat ironic that the secondary sectors of transporting and warehousing these overseas manufactured goods -- formerly made here, now outsourced -- is a growth sector. That's hardly cause for celebration.

Then there's inflation. Despite Thursday's CPI data and Friday's PPI numbers, unless you live in a cave, you know inflation has been robust. I noted Wednesday that real wages continue to fall behind real prices, regardless of whether you look at a 20-year or a five-year time period.

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Source: Michael Panzner

The Bureau of Labored Statistics (to borrow a term from Barron's Gene Epstein) can use whatever hedonics and seasonal adjustments it desires, but it doesn't change reality one bit. Inflation is eating into consumers' limited income gains faster than their wages are rising. Unless this trend is reversed, this bodes poorly for the future standard of living of U.S. consumers.

Despite this, I am bullish for the second half of the year, not because of the economic fundamentals, but because I anticipate that the rest of the market misunderstands these fundamentals. They are bullish, so therefore, I am bullish.

If that sounds contradictory, it is because fighting the tape is futile. Your own subjective reality doesn't matter -- until it does.

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Barry Ritholtz is chief market strategist for Maxim Group, where his research and market analysis are used by the firm's portfolio managers and clients in the U.S., Europe and Japan. He also publishes The Big Picture, his macro perspectives on the economy and geopolitics, entertainment and technology industries, and is a member of the board of directors of Burst.com, a streaming media software company. At the time of publication, Ritholtz had no position in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Ritholtz appreciates your feedback; click here to send him an email.