I've written about this before: The Street's oddly optimistic response to what looks like bad news.
Let's try and follow the latest example. Once again, consumers spent more, and inflation pressure is mounting. Looks to me like the "liquidity" provided by all those years' worth of free money still isn't soaked up. (Read that article I linked to above, and you'll note that consumers are now in their 23rd consecutive month of negative savings.) Sure, consumers are spending more. They're spending money they don't actually have -- at an increasing pace.
That just makes it more likely that the Fed will have to open up a can of whoop-somethin' in the coming months. Yet Wall Street continues to hear only what it wants to hear. When "Helicopter Ben" Bernanke recently warned that the Fed was not disavowing the possibility of future rate increases, traders still heard "Rate decreases are coming! Let's party!"
Indeed, one look at Mr. Market today suggests that he's grabbing for that fifth of vodka and donning the lampshade. He's giving a stumbly, incoherent thumbs-up to such rate-risky, cycle-prone companies as Ford
The trouble with this kind of party? Eventually, the buzz wears off, and there's an awful mess to clean up. Make sure your portfolio isn't one of those that will need to be scraped up off the bathroom tile.
Comments? Bring them here.
At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Bank of America is an Income Investor pick. Fool rules are here
