Stock Market "Melt Up": Why The Stock Rally Doesn't Necessarily Mean A Recovery

The U.S. economy is coping with alarmingly high double-digit unemployment, a widening commercial real estate bust, and over-indebted consumers. Few think the economic recovery now under way will be a spectacular one in 2010. So why has the stock market surprised skeptics by powering higher in recent weeks? One explanation being bandied about by equity strategists and portfolio managers is that the stock market may be in the midst of a momentum-driven trading phenomenon known as a "melt up" that has precious little to do with economic fundamentals.

Read the whole story

Comments

[sposton]

02:00 AM on 11/28/2009

"Few are predicting a reprise of the U.S. and global market collapse of 2008 that destroyed trillions in wealth around the world."

Wasn't that also true prior to our last meltdown? ;-)

[msjimmied]

11:26 PM on 11/27/2009

This from BusinessWeek? The dollar carry trade, that's why the dollar is falling. And that's why there is all this liquidity. Good god! everyone knows this, and yes, another bubble that the FED's will not want to pop. Find halfway through this article what the dollar carry trade is...sorry, best I can do trying to find one in an easy to understand format..

http://seekingalpha.com/article/175060-another-crisis-looms-right-around-the-corner?source=hp_mostpopular

[jws2346]

05:25 PM on 11/27/2009

Melt up, I like that one. It's the 100% opposite of melt down and the 50% opposite of melt sideways. Were do they get all of these nifty expressions?

[frankcaprafan]

03:03 PM on 11/27/2009

For a true market model, look up. Look to the starling.

http://www.youtube.com/watch?v=81wFZavdhPU&feature=player_embedded

[Joker Jam]

01:58 PM on 11/27/2009

I didn't spend a dime on Black Friday...not contributing to a rigged economy run by globalists who have contempt for the working class while bailing out the big banks at tax payer expense.

good articles: http://financeopinionss.blogspot.com

staying home 2010, 2012

[Joker Jam]

11:54 AM on 11/26/2009

vLooks like the overseas markets crashing on Dubai default fears...Maybe this is retribution for all the Wall Street excess over the past few months..

hat tip to http://financeopinionss.blogspot.com

let Wall Street fail. Let the banks fail

[HMDMSR]

10:02 AM on 11/26/2009

What can be done about all this cynicism and skepticism? Have more faith in the New Economy. The business cycle is a thing of the past. I hark back to the 90's: DJIA = 50,000, soon.

[Humanistic]

10:25 PM on 11/25/2009

"Melt-up" is the opposite of "Trickle-down". Don't you just love these slogans?

[Artos]

10:14 PM on 11/25/2009

It's no secret that the Stock Market always does better when unemployment levels go up. Corporations show false profits when they cut overhead. Employees are overhead. Simple as that. They are vultures who benefit from the "carcasses" of the unemployed. In addition to that what we aren't aware of is that now that the wealthy have all the money, they can buy up all the devalued stocks at bargain basement prices. What the middle class investor had to sell at a loss is the same stock the rich buy up until they once again control their own companies. No more interference from the lowly people. This melt up is what happens as a result. What the wealthy expect is that because we will become desperate and or because we can't resist buying their garbage, that at some point we will loosen our purse strings and go right back to our old routines. They win, We lose, simple as that.

[land2341]

04:43 PM on 11/25/2009

There have been no fundamental fixes to any of the problems that underly our economy. All the financial hocus pocus will not correct the fact that if the people at the bottom cannot earn enough money to survive they cannot support the larger society. Currently, the belief on the Street is that the giant pool of international money available for investment will continue to prop us up. And they may very well be right, for a year or two. But eventually it will dawn on the rest of the world that we produce nothing of value and they'll take their money some where else to play.

We are ending up like Brazil or Argentina with a very wealthy upper class and then everyone else barely scraping by. No middle class, no real recovery or growth. Hello Japan style lost decade, US style depression.......

[ScreenName05]

04:34 PM on 11/25/2009

And its a surprise to who that the stock market is not connected in any way to the real economy? Casinos do not reflect the economy, they reflect the number of people betting. It is time for the government to tax the casino at normal gambling rates 90% short term capital gains taxes. Otherwise there will be no investment in new business and we will ride this wheel of fortune until it collapses.

[comicpro]

02:29 PM on 11/25/2009

"Melt up": WTF is that???????????????? Oh brother another term to try and hide the fact that real manipulation is driving market higher and not some damn melt up!!!! give me a break!

[Artemis34]

01:34 PM on 11/25/2009

If you hold goods that do have an innate value and they are priced in US dollars then,

if the value of the dollar goes down, the price in US dollars goes up.

[Mason]

01:14 PM on 11/25/2009

Belief in an imminent financial recovery is unwarranted and foolish when many investors are buying three-month treasury bonds for $100 each knowing that they will only receive $95 in return when the bond matures.

Smart investors know the stock market no longer behaves according to the actual strength or weakness of the companies whose stock is being purchased or sold. Federal Reserve bailout money is responsible for the bull market. Large investment banks like Goldman Sachs that have been designated as TBTF can and do instigate surges in buying and selling according to the stocks it buys and quickly sells in massive quantities. Because their buying and selling largely dictates what other investors buy and sell, they rarely, if ever, get left holding the bag. Since the market is rigged, smart investors realize that it's yet another bubble. To protect their money from the inevitable crash they see ahead, they have decided to limit their losses by purchasing negative-yield bonds.

No one likes to lose money. Investors who choose to protect their money by purchasing negative-yield bonds, must be very frightened and anyone who has money invested in the market right now would be well advised to consider getting out.

[Brian Mpofu]

08:02 AM on 11/27/2009

Why would anyone knowingly purchase an investment with a negative yield? Is it not better to stay in cash.

[CaliGrown78]

12:56 PM on 11/25/2009

Anyone who uses the stock market to gauge what's going on in this country needs to wake up from the deep slumber they're in