The strength of the stock market is, in large part, a matter of confidence. There seem to be highly polarized views of the state of the market and the economy - strongly positive (growth and a huge rally are on the way) and highly negative (recession and bearishness) - without much uncertainty. Nothing illustrates this dichotomy better than the ABC/Money consumer confidence poll. While overall modestly negative at -11, the index this week stands at -45 among Democrats and -23 among independents, compared with +38 among Republicans. (The index has ranged from a high of +38 in January 2000 to a low of -50 in February 1992. Its worst annual average was -44 in 1992)

It is clear that we now have the faith-based economy. ABC/Money Poll

Google reported a good quarter (pro-forma, anyway) and the stock ramped upwards from its already astronomical valuation. Too bad that if they had properly accounted for stock option costs there would not have been any earnings. It’s a mania.

Foreign investors are snubbing the USA. What are we going to do if we can’t spend their savings on fancy wheels for our SUVs any more?

Source: Washington Post

From today’s Wall Street Journal: “”It’s like a videogame,” says Mr. Lioce, referring to the numbers and multicolored lights jumping across his screen that show current prices for a DAX contract. He clicks to buy or sell, and his order zooms into the Eurex system.

After some luck trading telecommunications stocks in the late 1990s, Mr. Lioce moved to E-minis. But it became hard for him to trade during the day after his company blocked Internet access to discourage employees who had formed a trading club. At first, he says, he tried walking his 25-year-old wife, Carolyn, through trades on the phone when she was not working her job as a manager of a Restoration Hardware store. Once, he says, she lost $2,000 on Cisco in a few minutes and got cold feet.

What’s a trader to do? “I began trading the DAX in the middle of the night,” Mr. Lioce says.

For Mr. Lioce and others, the DAX represents the latest hope for financial independence. With some electrical engineers he knows “working twelve-dollar-an-hour jobs at Starbucks and other places,” he says, he lost faith in corporations. He lost faith in mutual funds after relatives lost money. And he lost faith in stocks traded on the New York Stock Exchange after reading stories about specialists on the floor stepping in front of customer trades to make money for themselves. “You can only trust yourself,” he says.

Since he began trading the DAX three months ago, he says, he has lost about $2,000 — or 10% of the money he has reserved for DAX trading. He says his wife lost $3,000 to $5,000 on the DAX. The losses do not take into account the $2,000 a month they spend on trading commissions, software, data services and a high-speed phone line.

Still, says Mr. Lioce, “I’d like to quit my full-time job and move into this.” He adds, “I see opportunities in the DAX that I don’t see in my career.”"

For Day Traders, German Index Is Overnight Sensation

Alan Greenspan, this nonsense is your fault.

The NASDAQ continues strong despite weakness elsewhere as folks sell investment quality stocks (profits, dividends, that sort of thing) and buy speculative technology stocks. Presumably on the theory that they are cheap.

The problem with tech stocks is that almost all of them are born, live and die without paying investors a nickel. They take in money and build businesses based on a single idea which is often very profitable. Rather than paying out the profits, they hoard cash which they then expend trying to find a second idea. The first idea has its day, and then technology moves on. Many ideas are tried. Inevitably, they are unsatisfactory and a slow, agonizing death ensues, usually finishing in an acquisition by someone who wants the customer base, or sometimes a even quiet liquidation. Few tech companies pay dividends at all, and those that do usually pay only a nominal amount so that institutions which are limited to investment-quality stocks can buy their shares. Yes, they will sometimes buy back some stock but usually only because it has been handed out to employees at a discount under their option program and they want to limit the dilution of their shareholders. Speaking of which, the widespread use of employee stock options as “free” compensation is a further abuse of the shareholders whether or not they buy back shares. The net result is that these stocks have no investment value whatsoever and are only of speculative value, never for “buy and hold”. But “buy and hold” is exactly what the Wall Street shills recommend. “Hold the bag” is what they are saying. Without the willing participation of retail “investors”, the game wouldn’t work for the insiders who sell to them and make all the money. Hence the propaganda. What a racket.