The Bulls Have Been Winning

The markets certainly roared last week. The stress tests resulted in a few new large stocks deals for the big banks and a few more on the way. That should add to the stability of the financial system but it won't get rid of the bad loans on the books. However, investors seem happy and have driven stocks up quickly in the face of rising unemployment and a weakening economy. Stocks always go up before the economy turns but is it too far too fast?

The Chrysler bankruptcy should move along swiftly as the government successfully strong armed creditors. This event may effect the credit markets and the bankruptcy process in the future as big brother becomes a new risk a prudent investor must account for when deciding on whether to lend a company money. If contractual rights can be easily broken and moral suasion rues the day, capitalism may go by the wayside.

Many investors missed the big rally and don't want to miss the next move up. Plenty of cash is sitting on the sidelines and nobody wants to be left behind. Short covering drove stocks higher and as prices moved up long investors began to participate. Now we are at a point where most investors are unsure if we ran too far too fast. Bull markets climb the Wall of Worry but the economy seems to still have many risks as uttered by John Chambers at Cisco. Perhaps businesses are seeing a slight improvement but much of that is due to a reversal of the inventory correction. Consumer confidence has been moving up but are higher stock prices driving that optimism?

In a few months we will be able to look back and see if investor zeal has pushed stocks up too quickly or not. We will continue to be cautious and read the economic tea leaves as they appear.