This blog post originally appeared on RealMoney Silver on June 26 at 8:02 a.m. EDT.
Thursday's market ramp was a thriller and seemed to have been based on a reaction to several factors:
- a relief that Ben Bernanke's testimony went better than expected;
- a strong auction of $27 billion of seven-year U.S. notes;
- Lennar's (LEN) - Get Lennar Corporation Class A Report reduced cancellation rates (from 21% to 15%) and an improving California home sales and a reduction in that state's inventory of unsold homes;
- a high-profile retail merger and a better-than-expected earnings release from Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report; and
- an announced extension of a number of government liquidity programs (AMLF, CPFF, PDCF and TSLF) until February 2010.
Nevertheless, there were also negative developments that were ignored:
- rising continuous unemployment claims (627,000) and a revision higher of the previous week's statistics; and
- Fitch's late-day downgrading of California General Obligation bonds.
Also ignored were what appeared to be more sober (even dire) economic remarks from the Oracle of Omaha.
"You can't produce a baby in one month by getting nine women pregnant, or, in other words, the economy will be in shambles this year and well beyond." -- Warren Buffett
All in all, I would not make too much of yesterday's market advance, which, as my friend/buddy/pal, Bill Fleckenstein, stated on
" last night, simply "earned back" Monday's market drubbing and occurred in front of a large Russell rebalance and quarter-end mark-ups! By contrast, Dr. Jeremy "The Sunshine Boy" Siegel, who seems to have never met a stock or stock market that he disliked, continued to cheerlead on the same
While recognized worldwide for his musical legacy, Michael Jackson also left a financial morass behind (as did
, who also passed away this week).
Much like the U.S. consumer and banking system, both of which are now laden with debt and beholden to the U.S. government and "the kindness of strangers" to finance our growth, the pop icon was reportedly awash in at least
. Billionaire Thomas Barrack, chairman and CEO of Los Angeles-based real estate investment firm Colony Capital, served as Jackson's Treasury Department and Federal Reserve by agreeing to bail out the singer and set up a joint venture with Jackson that took ownership of his vast estate.
And much like the U.S. consumer, Michael Jackson experienced his own consumption binge by
spending money much faster than he earned it
In summary, despite Thursday's fireworks, this week's action seems to be a continuation of the
that I mentioned at the beginning of the week.
As I wrote in mid February in "
," there are parallels between the drug addictions in Hunter S. Thompson's book and the credit addictions in the new millennium. Stated simply, the withdrawal from the world's debt dependency will have unrivaled implications, with the unwind continuing to be painful for some time to come.
It will take time to -- er -- beat it.
Doug Kass writes daily for
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Know what you own: Other homebuilder and home goods stocks include Toll Brothers (TOL) - Get Toll Brothers, Inc. Report, D.R. Horton (DHI) - Get D.R. Horton, Inc. Report, Pulte Homes (PHM) - Get PulteGroup, Inc. Report, Home Depot (HD) - Get Home Depot, Inc. (HD) Report and Lowe's (LOW) - Get Lowe's Companies, Inc. (LOW) Report.
At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.
Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Long/Short LP.