07/10/2012 11:11 am ET | Updated Sep 09, 2012

The Armageddon Trade, Round 3

Every time during the past three years that the professional market pessimists have successfully talked the market down in the Spring by promoting the vision that Europe and Euro are about to collapse in a wave of "Lehman-like" events, many of the same pessimists quietly cash in on their short positions and buy back for the ride up when nothing quite so apocalyptic comes to pass. Thus it happens again in 2012.

The immediate trigger for the market rebound was the decision of the European leaders late two weeks ago to undertake a general agreement to revise the terms of their stability mechanism to potentially allow for direct use of common funding to provide bailouts to banks (still probably loans not equity as in the successful US-TARP program) without adding new debt to the sovereign credits of the banks' domiciles -- which would in turn accelerate the downward spiral of default potential at the country level, especially for Spain and Italy and even France.

Of course, there are those still playing the game of Chicken Little who did not get in on the action before the supposedly "unexpected" turn of events at the Euro Summit and get positioned for the quick market upturn. These folks have been all over the print media and Internet and cable TV channels, pushing the line that nothing announced last week will work or happen or matter. Again 'talking their book" by talking the market down. To bail them out of their short positions and set the stage for an even stronger market comeback later in the summer into the Fall, as has happened in each of the past three years. Fool me once, your fault; fool me twice, my fault; fool me three times, "Wall Street."

Of course, there is room for a multitude of opinions as to what will turn out to be the facts relating to the future of the Euro, of Greece and Spanish banks and Italian politics, of China's slowdown (or "hard landing"), or even the U.S. unemployment and job creation and second quarter 2012. The truth will emerge over time, but in the meantime, it would be wise to recognize that pessimistic opinions are no more reliable than optimistic ones.

Unfortunately, there is a tendency of casual market observers (and even CNBC hosts and commentators), to give undue credence to those who talk down the market, mostly because most individual investors still do not take short positions in stocks (either directly or using ETF's and derivatives and option) and thus do not realize that the doomsayers are just as likely to be talking up their own positions (namely, short-the-market positions).

It should be said that the CNBC folks have no such excuse, and are mostly doing their own best imitation of Fox News auditions because their on-air ideology is so fiercely anti-Obama they can't resist trying to force-feed a diet of bad news over the tube with the view that all such negatives will help elect Romney.

It's a shame that they have all but given up on the appearance of balanced market reporting (except for Steve Leesman an occasionally David Faber). The rest are mostly just a Romney super-PAC disguised as reporters. At least they put Larry Kudlow into an honest "opinion" show, unlike their indulgence of Rick Santelli's ideological "reporting."