Summer Of 2008 All Over Again

This summer (in the financial markets) feels just like the summer of 2008. That summer the DOW bounced around from 11,000 or so, to around 11,500.

On financial TV the debates went something like this:

Bull: The banks are fine, this sub prime thing is such a small portion of the market. We are way oversold. The market is going back to 14,000!

Bear: We are at the beginning of a major decline. The banks are in much worse shape than they appear. Get out now.

Then, the moderator would sort of snicker at the Bear, laugh with his/her co-moderator, and treat the bear as if they were a sort of cute chicken little.

We know what happened next. The Dow fell that fall from the mid-11,000's to the mid-8000's and didn't "bottom" out until the mid-6000's in March of 2009.

So, Joe Blow's 401k was cut roughly in half.

Now, he has almost made back what he lost, if he is lucky.

But this summer is eerily similar to that of 2008. The market keeps bouncing of that critical support of 1069 in the S & P. It is very painful in you are short, but I am pretty sure how this story ends.

The fundamentals have not changed. The banks in this country are not any better off. They have just been allowed to hide their losses. They cannot trade away their losses, even though they want to believe they can. The "stimulus" is over. It has come at a terrible cost of increasing debt and unemployment has barely budged. Households are still over-leveraged, and so are businesses.

For the average person out there, putting money into stocks just because you have no where else to put it is... well, it's just plain stupid. It is no different than going to the casino.

Of course, the market is way up today (though still in the range) and the media is gushing about the recovery. Home sales are falling off a cliff again and the index of leading economic indicators showed a decline for the third straight month. New jobless claims were also higher than expected today. But still, because of "earnings" the market is up over 200 points.

Makes a lot of sense, doesn't it?

I just noticed that today's volume in VERY LOW. It is Roughly 1/5th of the 10 day average volume. That makes this bounce even less convincing.